Ever feel like you always seem to run into setbacks as you advance towards your goals? Today, I’ll share the first of three tips to overcome those setbacks.
Tip #1 – The Law Of Awareness
First tip is understanding the law of Awareness. In 2008, I became one of the youngest advisors in the financial services industry to become financially independent, just 5 years after overcoming setbacks that led to a bankruptcy filing. In college, my car tag read “Know Thyself,” which you have to do, in order to grow thyself.
In 2018, after reflecting on two major business betrayals that led to a 7-figure financial loss as a victim of a Ponzi scheme, clients of mine also suffering losses, The SEC holding me responsible for both me and my client’s losses, which led to losing a few professional licenses, my business and reputation in the industry, it was this law of awareness that would teach me that I had built so strong a false identity and sense of self-worth around my past business and financial achievements and professional licenses, that they had become like idols to me.
In God’s mercy, he allowed my business to be destroyed so he could resurrect it, His way. (60 seconds) Now, as I watch the resurrection, this same law is teaching me that not tapping into my imaginative power is the only real limitation in designing the life and business he’d always dreamed of for me. As you advance towards your goals, if you’ll lean into the law of awareness, you’ll overcome every setback.
Asset allocation is based on the proven theory that the type or class of security you own is much more important than the particular security itself. Asset allocation is a way to control risk in your portfolio. The risk is controlled because the six or seven asset classes in the well-balanced portfolio will react differently to changes in market conditions such as inflation, rising or falling interest rates, market sectors coming into or falling out of favor, a recession, etc.
Asset allocation should not be confused with simple diversification. Suppose you diversify by owning 100 or even 1,000 different stocks. You really haven’t done anything to control risk in your portfolio if those 1,000 stocks all come from only one or two different asset classes-say, blue chip stocks (which usually fall into the category known as large-capitalization, or large-cap, stocks) and mid-cap stocks. Those classes will often react to market conditions in a similar way-they will generally all either go up or down after a given market event. This is known as “correlation.”
Similarly, many investors make the mistake of building a portfolio of various top-performing growth funds, perhaps thinking that even if one goes down, one or two others will continue to perform well. The problem here is that growth funds are highly correlated-they tend to move in the same direction in response to a given market force. Thus, whether you own two or 20 growth funds, they will tend to react in the same way.
Not only does it lower risk, but asset allocation maximizes returns over a period of time. This is because the proper blend of six or seven asset classes will allow you to benefit from the returns in all of those classes.