Lake of the Clouds on Mount Washington, NH. Photo: PaulB. Source: Wikimedia
I love hiking in the alpine tundra in the Appalachian Mountains. The way plants and animals adapt to the harsh weather up there is amazing. But nature is incredibly diverse, whether up in the mountains or down in the depths of the sea or out on the African veldt. Every possible niche seems to be stuffed with a diverse array of plants, animals, fungi, and microorganisms. Wherever there’s energy, there’s something adapted to use that energy to grow, reproduce, and spread.
In 1977 the deep-sea submersible Alvin discovered an entire community of tube worms, clams, limpets, and shrimp that feed off the bacteria that in turn get food from the chemicals that come out of hot-water vents at the bottom of the ocean. There’s a whole ecosystem down there supported by geothermal energy.
Nature’s diversity allows it to recover quickly from disasters. In 1988 Yellowstone National Park was overrun by forest fires. The fires swept across most of the backcountry, and even threatened some of the geyser areas. But a year later, the charred earth was covered in grasses and flowers, and now there’s a thriving forest community.
Yellowstone in 1989. Photo: Jim Peako. Source: Wikimedia
Our investments should follow nature’s example. Invention and ingenuity allow for commerce and production in almost every area of human activity: from nomadic desert tribes taking tourists across the Sahara to people arranging helicopter commutes via their smartphones. By diversifying globally across various sectors and industries, into small, mid, and large-cap companies we participate in the broad spectrum of human resourcefulness. And when there’s a disaster, a diversified portfolio comes back much more quickly.
I’m not saying that diversification is simple or that it provides a free lunch. But the best way to benefit from the amazing creativity of the human spirit is to have part of our portfolios exposed to as much as possible. There’s a line about this in the hit musical Hamilton: “When you’ve got skin in the game, you stay in the game. But you don’t get a win unless you play in the game.”
Douglas R. Tengdin, CFA
Charter Trust Company
“The Best Trust Company in New England”