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The Recipe for Wealth Is Like the Recipe for Health: It's All About Balance
Hoxton Blog • The Recipe for Wealth Is Like the Recipe for Health: It's All About Balance
Diversification is key to a balanced portfolio.
It’s one of those things that is easy to say. It’s a simple concept. Most people know it is true. But, when markets are high and certain companies are doing well, it can be tempting to put all your eggs in one basket.
This, though, is a bad idea - as evidenced by Nvidia’s second-quarter earnings report this week.
The company beat analyst estimates for both revenue and earnings, posting $46.7 billion in sales. On top of that, it released strong guidance for the coming quarter, signalling optimism about future growth.
Yet, even with these impressive headline figures, Nvidia’s shares fell by almost 3% and S&P 500 futures fell in the immediate aftermath of the announcement.
So why is this?
The stock dip wasn’t about failure – it was about high expectations. With traders betting on a 6% swing, anything short of perfect was bound to disappoint.
The core business is still booming. AI chip demand is intense, and the data centre segment rose 17% from last quarter and 56% year over year.
But there are shadows. No H20 chips were shipped to China this quarter as export rules tightened. Management hinted an easing could add $2-5 billion in sales next quarter. That’s a big “if,” and markets don’t like geopolitical uncertainty.
Investors aren’t just focused on Nvidia’s latest results, but on how clearly it can map the future.
When Market Giants Stumble, Entire Portfolios Can Sway
Nvidia is one of the so-called “Magnificent 7”, or “Mag 7” – a group of high-performing, influential stocks in the U.S. technology sector.
Because of their size and recent success, these companies have become market barometers. Together, they now account for around a third of the S&P 500’s total market capitalisation – roughly the same as the bottom 433 stocks in the index.
Their outsized influence means that any news about their earnings or business outlook can drive major moves across the broader stock market, affecting millions of investors.
In the case of Nvidia, what seemed like positive news still affected the market negatively.
This just goes to show that you should never try and time the market.
Putting all your money into Mag7 stocks in the hope that they will increase in value quickly may be a tempting thought – after all, they’ve dominated the market until now – but it’s riskier than it seems. Things can change at any time.
Stocks are fickle. Just one negative news story, announcement or political decision can cause them to zigzag.
We saw this last week, when Fed chair Jerome Powell’s comments at Jackson Hole caused the stock market to jump and fall over the course of a few days.
It happened back in June, when the well-trailed feud between Elon Musk and U.S. President Donald Trump came to a head, causing Tesla stock to plummet 14%, wiping out roughly $150bn of its market value, in one day.
And, as I wrote in a recent LinkedIn post, W.H. Smith lost 40% of its value in a single day this month – the kind of shock no investor can predict. They’re a big brand with a long history and a reliable name. Then an “accounting mistake”, which no one had any idea of, comes out of the left field.
By choosing to invest in one stock, or one area of the stock market, you’re betting your entire future on that company or sector. If they stumble because of regulatory changes, disruption or earnings miss, your portfolio could take a big hit.
As we have seen with Nvidia, high expectations leave little margin for error. If growth slows, prices can fall much faster than they rose.
People forget that past market darlings like Cisco, Intel, Nokia in the 2000s once looked “untouchable”, in the same way Big Tech companies seem now. But they may not remain dominant for the next 10-20 years.
Too Much of a Good Thing Can Leave You Weak
In some ways, investments are like your diet.
Most people would agree that broccoli is a healthy food. But if you only ate broccoli and nothing else for the rest of your life you would likely suffer severe malnutrition, resulting in weight loss, muscle weakness and eventually death from organ failure.
And this is because broccoli may be full of fibre, vitamin C and folate, but it lacks calories, protein and fats.
A balanced diet is paramount to a healthy body. And a balance of investments is vital to a healthy portfolio.
With diversification, losses in one area can be offset by gains elsewhere.
How Exposed is Your Portfolio to U.S. Equities?
Take the U.S. stock market, for example.
It’s important to understand that when you invest in global equity funds, such as those tracking the MSCI World Index, a significant portion of your investment is inevitably tied to U.S. stocks.
For example, the MSCI World Index, a popular benchmark for developed markets, has about 70% of its weight in the U.S. – by far the largest single country allocation.
This means that even broadly diversified global funds are heavily influenced by the performance of U.S. companies, especially the large-cap tech giants that dominate major indexes.
While this can offer exposure to some of the world’s most innovative businesses, it also means that U.S. market movements can have an outsized impact on your portfolio’s returns.
A recent example came on Friday, when U.S. inflation data was released. The “core” personal consumption expenditures index - closely watched by the Federal Reserve - rose 2.9% year over year, which was in line with economist expectations, but still well below the Fed's 2% target.
Following the release of the data, all three of the major U.S. indices slipped.
This highlights the importance of intentional diversification - not only across geographies, to help reduce volatility and tap into growth abroad, but also across asset classes. Relying solely on stocks can leave investors exposed when markets dip.
Complementary assets such as gold, real estate, or infrastructure can often behave differently than equities during downturns, providing another layer of resilience. They are, therefore, a good addition to a balanced portfolio.
How to Shield Yourself From a Potential Correction
If all your eggs are in the U.S. basket, a sudden downturn could catch you off guard.
By spreading investments into other regions, you create balance – just as you would by eating more than one type of food.
Why Global Diversification Makes Sense
Since the start of 2025, our clients have benefited from a shift in strategy. We trimmed U.S. exposure at a time when inflation and political uncertainty were creating choppy conditions.
In turn, we increased allocations to Europe and the UK, where growth has been steadier and inflation more subdued.
This broader spread is designed to protect portfolios from being overly reliant on a small set of stocks or a single economy – particularly when the Mag 7 still holds so much sway over U.S. benchmarks.
The result is a portfolio better equipped to handle shocks and more open to opportunities across multiple regions.
Keeping Your Investments Nourished for the Long-Term
At Hoxton Wealth, we can help you avoid overconcentration and instead build a portfolio that’s properly balanced across sectors, asset classes and regions.
By keeping a close eye on shifting global markets, we adjust exposures when necessary – reducing risk in overheated areas and seeking opportunity where value emerges.
This proactive approach means your portfolio isn’t left at the mercy of a single economy or a handful of mega-cap stocks.
Our client services team is always here to help – whether you have questions about your current portfolio, want to review your long-term plan, or simply need reassurance during uncertain times.
You can reach them by email at client.services@hoxtonwealth.com or via our global WhatsApp number: +44 7384 100200.
Our advisers are committed to ensuring your investments work as hard and as smart as possible, so you can focus on living the life you want while your money is set up to grow with balance and resilience.
Because just like a healthy diet, a well-diversified portfolio is the key to lasting strength, stability and growth.
How Can We Help You?
If you would like to speak to one of our advisers, please get in touch today.
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