A few weeks ago, while listening to one of my favorite podcasts, the guest—Rob Arnott—said something that really struck a chord with me. It wasn’t revolutionary or groundbreaking, but during a conversation about portfolio construction, Rob emphasized the importance of diversification, calling it an “exercise in regret.”
I found that phrase brilliantly summed up the psychology of building a well-constructed investment portfolio. At times, we regret not allocating more money to a hot investment. Other times, we lament having invested in something that didn’t pan out as planned. We wish we had either doubled down to amplify gains or avoided a particular security altogether.
In recent years, domestic stocks—especially those in the S&P 500—have significantly outperformed their international counterparts. This has led some investors to question the value of geographic diversification. I’ve heard claims like, “There’s no need to invest outside the U.S.” and “Some regions are being left behind economically.” While it’s true that U.S. markets have led over the past 15 years, that outperformance won’t last forever. Eventually, international equities are likely to offer much-needed diversification benefits and serve as a counterbalance to U.S. market exposure.
Within the U.S. market, much of the recent performance has been driven by a handful of large technology companies, often referred to as the “Magnificent Seven.” These companies’ outsized profits and growth have accounted for a significant portion of the S&P 500’s gains in recent years. From the end of 2019 through June 2025, owning just the Magnificent Seven would have resulted in a price gain of 660%, compared to only a 72% gain for the equal-weighted S&P 500 index.
These are just a few examples of the common “regrets” investors face. When you find yourself saying, “I wish I’d put more into that stock,” or “What was I thinking investing in that?”, remember that regret is a feature—not a flaw—of diversification. A well-diversified portfolio will almost always include a few standout performers and a few laggards. Because successfully timing and rotating between investments is notoriously difficult, diversification remains one of the most effective strategies to manage volatility and spread your risk across a broad range of opportunities.
Ready to take the guesswork out of diversification and build a portfolio you can feel confident about? Connect with an experienced Vindicta financial advisors today. Whether you’re navigating regret or rethinking your strategy, we’re here to help you invest with clarity. Share your contact info now to start your personalized portfolio review.