Ombretta De Marco @Ombrettademarco: "How to manage a portfolio..."

Italy

How to manage a portfolio in an “everything is expensive” regime. An “everything is expensive” regime is not a short-lived anomaly. It is a transition phase in which: – expected returns compress – risk is not obvious, but latent – the difference is made by portfolio management, not by picking the “right” asset 🎯 The right objective It is NOT: ❌ maximizing returns ❌ guessing the next market top It IS: ✔️ reducing irreversible mistakes ✔️ preserving flexibility ✔️ maintaining future optionality 📌 a) Position sizing (more important than selection) When everything is expensive: – weights matter more than ideas – even a good asset, if overweighted, becomes a problem Concrete examples: – Holding $NVDA (NVIDIA Corporation) because it is a structural AI winner is reasonable. Letting it become 20–30% of the portfolio because it keeps going up is not. – Being exposed to US equities is sensible. Being almost entirely concentrated in mega-cap tech because “they always recover” is a risk choice, not diversification. Guiding principle: > Better good assets in moderate weights > than perfect assets in the wrong weights. Operationally: – trim oversized winners – cap single-asset and single-theme exposure – accept not being “all-in” on anything 📌 b) Realistic expectations (an underestimated weapon) Historically, after “everything is expensive” phases: – future returns tend to be mediocre – but positive, not catastrophic Concrete examples: – After long rallies, broad equity indices often deliver single-digit annual returns, not crashes. – High-quality stocks like $MSFT (Microsoft) or $AAPL (Apple) may still perform, but at a slower pace. Common mistake: > projecting the last 2–3 exceptional years into the next decade. Correct approach: – lower return assumptions – prioritize resilience over aggressiveness – accept sideways or uneven markets as normal 📌 c) Liquidity as a tool, not as timing In these regimes: – liquidity is not a forecast – it is an option Concrete examples: – Keeping part of the portfolio in cash or cash-like instruments is not a bearish call. – It allows you to act if markets correct sharply, a sector de-rates, a quality asset becomes mispriced. This is not “staying out of the market.” It is staying free and avoiding forced selling. 📌 d) True diversification (not just labels) When everything rises together: – correlations tend to converge – “cosmetic” diversification stops working Concrete examples: – Owning multiple US tech stocks does not equal diversification. – Holding equities plus long-duration bonds may fail if both are sensitive to the same macro drivers. – Exposure to assets with different drivers matters more than the number of positions. Key questions: – am I diversifying risk drivers? – or just changing the name of the same exposure? In these phases: – fewer instruments, better understood – less storytelling, more function Historical mistakes investors make in phases like this History is very consistent. The same mistakes repeat, cycle after cycle. ❌ Mistake 1 – Confusing “it held up” with “it will perform” Example: – An asset that protected well in the previous stress phase is often overbought afterward. – Past protection does not guarantee future efficiency at current prices. 📌 Past resilience is frequently paid at a premium. ❌ Mistake 2 – Chasing the dominant narrative Every “everything is expensive” phase has its untouchable story: – “AI changes everything” – “there are no alternatives to equities” – “this time is different” These narratives are rarely entirely wrong. They are simply overextended. ❌ Mistake 3 – Increasing risk to maintain returns Concrete behaviors: – increasing leverage – concentrating portfolios on a few high-momentum names – stretching into assets not fully understood Not because investors are more confident, but because they refuse to accept lower expected returns. ❌ Mistake 4 – Believing risk has disappeared “Everything is expensive” regimes often coincide with low visible volatility and high complacency. Risk is not gone. It is mispriced. When it reappears, it tends to hit crowded trades and over-weighted winners. ❌ Mistake 5 – Abandoning the method The final and most costly error. In these phases many investors: – stop rebalancing – stop asking uncomfortable questions – stop thinking in probabilities Discipline feels restrictive. In reality, it is the only protection. 🧠 Synthesis An “everything is expensive” regime is not a punishment. It is a maturity test. It does not reward speed, conviction, bold predictions. It rewards position sizing, realistic expectations, independence from consensus comfort. When everything looks expensive, the real competitive advantage is not doing more. It is making fewer serious mistakes. $GOLD

4 Mentioned

NVDA

NVIDIA Corporation

MSFT

Microsoft

AAPL

Apple

GOLD

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