The opinions of contributing entrepreneurs are their own. </p><div>
Key Takeaways
- When investing, structure and discipline are more important than bold ideas or predictions.
- Over-diversification and complexity often hurt returns by undermining clarity, costs and behavior.
- The best portfolio is simple, cost-conscious, and one you can sustain.
Most entrepreneurs are not set up for comfort. They trade without perfect information and bet on themselves long before the odds look good. In business, that mentality is often rewarded. When it comes to investing, it often leads people in the wrong direction.
After a liquidity event, many founders approach investing the same way they approached growth. The focus shifts to new ideas and new strategies. Much less attention is paid to the decision that silently determines everything else.
Asset allocation is the basis
Research has been pointing to the same conclusion for decades. Long-term results are determined much more by portfolio structure than by stock selection or market timing. The data hasn’t changed much. Asset allocation often still explains most long-term outcomes more than 90%.
This can be an anticlimax for entrepreneurs. Big wins usually come from bold calls. That’s not how investing works. Investing works differently. Results usually follow structure and not prediction.
The goal is not to find the next moonshot. It’s about building a portfolio that builds steadily, holds up through adversity, and supports your life without constant intervention.
When diversification becomes a problem
Diversification is often presented as an undisputed asset. In practice it often goes too far. Many portfolios today include a long list of asset classes, each added in the name of reducing risk.
The result is often the opposite. This is because complexity increases, costs pile up and investors lose clarity on what actually drives performance. When markets become volatile, complexity encourages reactions. Positions are added because they have worked recently, and positions are reduced because they have disappointed recently.
Over time, behavior becomes a bigger drag on returns than market conditions themselves. Portfolios that are difficult to understand are difficult to maintain, especially during periods of stress.
Asking the question most investors ignore
When people think about asset allocation, the conversation usually starts with what to include. Should you own gold? Should you invest internationally? Should alternatives play a role?
Those are reasonable questions. But an equally important question is almost never asked: what are you not allowed to own?
Every additional investment creates friction. It adds costs, correlation risks and emotional complexity. If an asset doesn’t significantly improve results after taxes, fees, and behavior are taken into account, it may not belong in the portfolio at all.
Preserving and growing wealth does not require constant innovation. They require selectivity and restraint.
Price discipline is still important
The asset allocation sets the framework, but the price you pay determines how forgiving the outcome will be. All asset classes move in cycles. Optimism drives prices higher than fundamentals warrant. Fear pushes them lower than logic suggests.
Entrepreneurs understand the cycles in business, but ignore them when investing. Chasing performance near peaks and faltering during recessions is a common and costly pattern, and buying at reasonable prices eliminates the need to predict the future. It requires patience and discipline.
This is often where investors benefit from professional guidance, not because advisors know what’s going to happen, but because they help enforce discipline when emotions are loudest.
The costs are slowly rising
Entrepreneurs are usually meticulous about expenditure within their company. They keep a close eye on margins and question recurring costs. That same discipline does not always extend to investment portfolios.
Management fees, transaction costs and taxes appear manageable in themselves. Over time, they become a meaningful drag on results. Portfolios designed without consideration of costs often struggle to support long-term spending needs, especially during periods of lower returns.
Being cost conscious is not about minimizing costs at all costs. It’s about making sure every expense serves a purpose and improves the overall outcome.
The portfolio you can live with
Even the best-designed portfolio will experience volatility. No allocation eliminates uncertainty without also eliminating growth. The most successful portfolios are not the portfolios with the highest theoretical returns. They are the ones that investors can hold on to through market cycles.
This is where risk tolerance becomes personal. Entrepreneurs already bear concentrated risks through their businesses. Their investment portfolios must acknowledge that reality rather than exacerbate it.
Staying invested during periods of stress is not a test of intelligence. It’s a test of temperament.
Why simplicity wins
The longer I work with entrepreneurs, the more convinced I become that simplicity is an advantage. A clear structure creates clarity. Clarity creates trust. Confidence makes it easier to stay disciplined when the markets test your resolve.
These principles are not new. They are not complicated. And they don’t rely on predicting the next trend. They depend on restraint and patience.
Leonardo da Vinci once said that simplicity is the ultimate sophistication. In investing, that idea holds up remarkably well. Long-term success does not come from doing more. It’s because we do fewer things well and give them time to work.