Investment Diary of a CIO’s son

By Steve Brice, Global Chief Investment Officer

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4 June 2025  I  8 mins read

Last year, I wrote about the investment journey of our youngest son. However, our eldest son took a very different path. Instead of building a balanced portfolio from the start, he invested 100% into equities, especially US equities.

His rationale was clear. The money, which we gifted for his 18^th birthday, was a bonus and he did not need the money for over 10 years. So, we looked at the historical performance of US equities over long periods of time. We found that it is very rare that returns were negative over an extended time horizon. Meanwhile, he said that he wouldn’t be checking his portfolio daily. Therefore, short-term market volatility would not be a problem, to him at least.

You can imagine me having reservations about his approach. We will discuss the problem of geographic concentration later, but the 100% allocation to equities was ‘interesting’. Conceptually, it made sense. My son’s time horizon was long enough to warrant a very high allocation to equities. However, I thought it would be interesting to see how he dealt with the inevitable portfolio swings.

Tracking the portfolio

Given that he began his investment journey in mid-2023, things started out very well. He basically invested 50% into an S&P500 ETF and 50% into a Nasdaq ETF, which by the end of 2024 were up around 40% and 50%, respectively. So far, so good.

However, in the second half of February this year, US equities started to weaken and fell about 10%. It was at this point that I got a phone call to discuss ‘whether he should be worried’. Of course, you can stand back and say he is still up around 30%, but the reality was that he had mentally banked the 40-50% gains and emotionally he was experiencing material losses for the first time. Hence the phone call.

Thankfully, he was not panicking. He wanted ideas on how he might tweak his portfolio to reduce its volatility – volatility was not a problem when markets were going higher and higher, but once they reversed, the emotions kicked in. I hear this all the time with clients, regardless of their experience level.

Managing volatility

Now, the obvious place to diversify would be into bonds and gold. The challenge was that both had rallied during the equity market sell-off. As a house, we were still bullish on gold at that stage, but we believed that US government bond yields, then at 4.25%, were not super-attractive. Therefore, my son decided he would be patient about reallocating his money and would switch into bonds once yields had risen slightly. The key here was to invest in a fund where the predominant exposure was high quality investment grade bonds, as sub-investment grade (also known as high yield or junk) bonds would have a high correlation to equities even in relatively normal environments.

Of course, the next call came after ‘Liberation Day’, when US President Trump imposed import tariffs on all major economies and US stocks plummeted over 10% in two days. While my son had diversified somewhat into bonds, his equity exposure was still sizeable and still 100% in US stocks. The US exceptionalism story was coming under a lot of scrutiny, and this worried him. Therefore, he decided he wanted to diversify into other stock markets.

The ‘good’ news was that stocks around the world sold off at the same time. So, while he was selling an asset (US equities) that had cheapened, he was also buying an asset – in this case European equities – that had also gone on sale. Therefore, emotionally he found this switch easier.

Lessons learnt

As I reflect on the different journeys our boys took – the younger one built a diversified portfolio to start with and averaged into it over time – I am trying to figure out who has got the better education from this process (which was always our number one objective of giving them some money to invest).

The younger one learnt about portfolio construction from the start and does not check his portfolio often. However, this means he has no mental scars from the journey and therefore has probably learnt less about himself and his relationship with investing.

The older one has learnt that investing is emotional and that the best way to deal with this is to be diversified.

They got to the same outcome, the benefits of a diversified portfolio, via a very different route, but my hunch is my older boy probably learnt more about what markets can do to your emotional wellbeing.

I guess the real risk of letting them decide on their own investment approach is if they had put 100% into Bitcoin, and it went to the moon, which is the exact opposite of what I wanted them to learn. Thankfully, neither of them chose this route.

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