The Steve Jobs Approach: Simplicity in Investment Portfolio Design

In today's fast-paced world, where technology continues to shape our lives, there is a valuable lesson to be learned from the late Steve Jobs. Jobs, the co-founder of Apple Inc., was known for his attention to detail and obsession with simplicity in design. While this philosophy has often been associated with technology, it holds relevance across various industries, including how portfolio managers design investment portfolios.

In this blog, we will explore the power of simplicity, examine its application to investment portfolios, and discuss the downsides of complexity in investing.

‍

‍

The Power of Simplicity in Design

When you enter the world of Apple, you discover that simplicity reigns above all. Apple's products, from their sleek, elegant appearance to their meticulously crafted packaging, are all characterized by simple design. Unwrapping an Apple product’s packaging is like opening a portal to a realm where technology becomes art, and every touch, every interaction, becomes a moment of pure excitement and delight. This is the magic of Apple’s simple and sleek product design, a testament to the visionary mind of Steve Jobs.

For Jobs, simplicity was more than just a design principle; it was a gateway to a remarkable customer experience. This concept is often associated with technology at large, but the truth is, every type of business should be thoughtful about their customer’s user experience, including how financial advisors design your investment portfolio. 

Simplicity in Investing

In today's investment landscape, many investors are seeking simple solutions that are easy to understand. However, investment portfolios can be plagued by unnecessary complexity. This manufactured complexity often stems from a misguided attempt to justify higher fees charged by financial advisors. The truth is complex portfolios filled with a multitude of investment products does not necessarily mean greater diversification or better investment returns. Instead, a complex portfolio often confuses investors and makes it difficult to understand what they are truly invested in.

To achieve simplicity in investment portfolios, we must critically assess the need for complexity and prioritize transparency and clarity.

‍

The Downsides of Complexity in Portfolios

The necessity of having numerous mutual funds in a portfolio should be questioned. While diversification is crucial, it can be achieved with a streamlined portfolio containing fewer mutual funds. Having an excess number of funds can result in overlapping investments and reduced clarity.

By simplifying the portfolio, investors gain a better understanding of their holdings, enabling them to make more informed decisions and navigate market fluctuations with greater ease. When you clearly understand how your portfolio performs and where your expected investment returns come from, you can live with greater confidence and emotional stability.

‍

Overpaying for Financial Advice

If you're unsure about the underlying investments within your portfolio, it could be a clue that your financial advisor is overcharging you. 

Advisors who charge high management fees often complicate your investments unnecessarily to create an illusion of added value. This tactic is driven by optics rather than a genuine focus on client outcomes. They may add unnecessary investments in the portfolio to justify an expensive fee, making it difficult for investors to differentiate between essential and redundant strategies. 

Consider this: would you pay a financial advisor 1% or more of your assets under management if they invested your savings in only one or two mutual funds? 

Obviously not! 

It is crucial not to fall into this trap and to seek financial advisors who prioritize simplicity, transparency, and putting their client’s interests first.  

‍

Takeaways

In a world where simplicity often takes a backseat to complexity, it is essential to recognize the value of Steve Jobs' philosophy. He reminds us that design isn’t about what something looks like, but how something works. 

The benefits of a simple approach to investing cannot be understated. Applying the principles of simplicity in investment portfolio design can lead to: 

• Improved user experiences
• Increased understanding
• Enhanced discipline during market volatility 
  

At Sensible Portfolios, we prioritize a simple yet sophisticated approach to investment portfolio design.

‍

Sources: 
Medium.com

Investopedia
Investor.gov
Investopedia