Launa and I love to take walks along a particular California beach. Ten years ago the hillside adjoining the beach was developed into a premier ocean front neighborhood. Laid out in tiers, the area is a classroom on the value of location in real estate. The lots right on the beach start at $15 million. Just a few feet back on the next tier up for “only” $10 million you can get the same sized lot with a 9,000 foot home sitting on it.
For people who can afford lots along this beach, the cost of building the actual home is insignificant. We enjoy seeing the exotic materials and designs involved in those amazing homes. But building on a beach brings with it many challenges as the moist, salty ocean air that feels so wonderful to human skin, can be very destructive to building materials.
We have watched as the beautifully ornate iron fences and railings in the neighborhood have rusted away in just a couple of years. It seems that almost before the new homes are completed, the iron begins to deteriorate. It amazes us to see ugly, corroding wrought iron work surrounding these $10-30 million dollar homes.
Many of the newest homes in the neighborhood have begun installing glass railings. Glass is not corroded by salty air, so its use makes sense. But glass does not prevent seagulls from leaving their messes and it also attracts salt deposits from the air. One homeowner told me she has to clean her glass railings every few days. But she mentioned it is far less troublesome than maintaining iron in the ocean environment. The fact is, no matter where you live or what you build with, all homes require maintenance.
Last week I met a person who admitted to neglecting his investment portfolio for five years. Investments, like everything else, need maintenance, and some require more than others. A portfolio of high maintenance investments may start off being exactly what you want but keeping it that way requires constant attention and effort. It will need some regular light touch up. Occasionally you might have to get out the financial version of a sandblaster for a major overhaul, or you may even need to tear it down and start over. High maintenance investments might include options, futures, or even individual stocks. As with a beach house, if you are not willing to do the work, do not own the investment.
The investing world invented lower maintenance items for people who prefer a “glass railing” portfolio. Things such as mutual funds, exchange-traded funds, and bonds are some items that might require less maintenance by the owner. They still need regular cleaning (rebalancing), but the overall time commitment should be much less.
A wise person once said, “Never build a house without first considering the cost.” The same principle applies to investing. Do not put together a beautiful “wrought iron” portfolio unless you are prepared for the maintenance that will follow.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 375 E Riverside Dr, St. George, UT 84790
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