Investing can sound intimidating — full of unfamiliar terms and complex strategies. But it doesn’t have to be. In fact, some of the same principles you use to plan a healthy, balanced diet can help you understand how to build and maintain an investment portfolio. Just like your body needs the right mix of nutrients to function well, your financial life benefits from the right mix of investments.

We’ll break down a few key investing concepts to show the connections.

Asset Allocation

Take, for example, asset allocation. Your asset allocation refers to the percentage of your portfolio that represents different categories such as stocks, bonds, cash or alternative investments. Your diet also consists of different categories such as protein, carbohydrates, fruits, vegetables and maybe a little dessert. Keeping a balanced asset allocation keeps your portfolio healthy, and a balanced diet helps keep your body and mind healthy. In both cases, the appropriate ‘balance’ is different for everyone.

Diversification

Let’s take this one step further. Now that you have a good balance in the broad categories above, let’s talk about diversification. In your diet, you want to include many protein sources for example. When planning your meals for the week, you include some chicken, beef, pork or maybe even beans or tofu. In your portfolio, it’s the same. It’s best to hold several different companies across several sectors rather than one type of stock. This could include stock in domestic, international, larger companies or smaller companies. They each add their own value to the portfolio and some may appear in higher quantities. Variety is good for both a portfolio and your diet.

Rebalancing

It’s good to step back and look periodically at how both your portfolio and your diet have evolved. It’s normal for certain categories to become overweight or underweight due to over or under performance. A rebalance is an opportunity to get back into balance based on your goals for the portfolio. Rebalancing is also a time to factor in where we are in a market cycle. For example, when we look at the bond portion of your asset allocation, we consider where interest rates are and if they are likely to rise or fall as that will influence the amount to allocate to bonds as well as what type of bonds to hold. Similarly, when selecting fruits to incorporate in your diet you may consider what is currently in season to get the best fruit at that time. Considering the cycle is important but doesn’t guarantee you’ll be correct so it’s best not to make extreme shifts. Only slight modifications.   

Risk Tolerance

Risk tolerance is your comfort level with how much you are willing to have your portfolio rise or fall with the ups and downs in the market. This is where diversification comes in — knowing that each piece of your asset allocation has a purpose and will behave differently in changing market conditions. It’s important to plan your investments to match your goals so you can feel confident and comfortable with your portfolio. Short term goals are often invested more conservatively and long-term goals with more growth because there is the time to weather the ups and downs of market fluctuations. This is true of diets too! Youth can provide resilience despite the diet. As we age, we can see the impact on the decisions and feel them more directly. The most important thing to consider is what you need your portfolio to do for you. If you can afford to take less risk and that would make you feel the most secure, it’s okay to do that. Similarly, if you’re happy to eat less desserts, your weight will likely stay more stable.

Taking That Next Step

It’s natural to stick with what feels familiar — or to avoid what doesn’t. If you’ve never cooked with tofu, for example, you might not know what type to buy, how to prepare it, or how to incorporate it into a meal. Investing can feel the same way. If you’re new to it, you might wonder what type of account to open, how to choose your investments, or how to put a plan together.

The good news is you don’t have to figure it all out on your own. Just like a nutritionist can help you build a healthy, sustainable diet, a financial planner can help you design a financial plan and investment portfolio tailored to your goals. With the right guidance, you can feel more confident, make informed decisions, and stay on track — in your financial life and beyond.