More isn’t always better.
This rule applies to both your health and money.
Prescription drugs are the most concentrated position in many retirees’ portfolios.
The WSJ recently published an article on the dangers of Polypharmacy, patients ingesting eight or more medications simultaneously.
They uncovered some alarming data concerning seniors’ healthcare.
In 2022, 7.6 million seniors were simultaneously prescribed eight or more medications for at least ninety days.
Of those seniors, 3.9 million took 10+ drugs at once.
More than 419,000 were prescribed 15+ drugs at the same time.
Among those in the analysis taking eight or more drugs, 3.6 million had prescriptions for at least one medication that geriatricians say elderly patients should avoid.
To compound this dangerous situation, seniors taking eight or more drugs receive prescriptions from multiple doctors.
Patient coordination between these doctors is lacking. We have a siloed medical system, where every health issue we face is often viewed as an isolated incident. Polypharmacy violates the first rule of medicine: Do No Harm.
Multiple medications dispensed by Doctors not communicating with each other lead to poor outcomes. Harmful side effects, falls, and confusion are just a few of the potential toxic side effects of this practice.
A fragmented healthcare system, combined with inadequate oversight, exacerbates the problem.
Just as a fragmented healthcare system can lead to life-threatening outcomes, the same applies to investors’ portfolios.
Fragmented and undisciplined investing behavior leads to overconcentrated positions and unnecessary risks.
Portfolio Polypharmacy results in positions with overlapping risk portfolios. In the 1990s, investors believed diversification meant owning several tech stocks. We might see history repeat itself with a new generation focusing solely on the AI trade.
Seniors suffer from a lack of communication among their multiple physicians. Investors fail to consolidate their accounts under one roof and strategy. The lack of communication between retirement and taxable accounts, involving multiple advisors, results in conflicting strategies rather than proper asset diversification.
Often, old 401(k) plans from previous jobs are orphaned and left to drift aimlessly in the turbulent market fluctuations.
Seniors take new drugs to treat the side effects of older ones, leading to an infinite loop of pills that often create more problems than they solve.
Investors take similiar actions by trying to correct past mistakes and losses by piling on more risk to make their money back.
The side effects of this strategy are just as deadly.
Sometimes doctors feel inclined to do something by writing a prescription that’s not necessary, or worse, counterproductive. Some patients receive prescribed antibiotics to fight viruses. Viruses don’t respond to antibiotics, but the prolonged use of antibiotics leads to antibiotic resistance. Unless you are compromised, rest and fluids are the most effective remedies for conditions like colds and the flu. Doing nothing wins again.
Investors often feel they must do something when, 99% of the time, shutting up and waiting is the best strategy. Doing nothing is underrated. Time spent in the markets, rather than trying to time the markets, has the most powerful impact on your returns.
Investors can learn a great deal from the risks associated with Polypharmacy. More is not always better. Coordination matters, and investment side effects, such as the overuse of leverage or excessive trading, are just as dangerous as taking too many medications or the wrong ones.
Despite conventional wisdom, in many cases, pruning provides superior outcomes to adding.
Have a Happy New Year!!! Thank you so much for reading, and I look forward to seeing you in 2026.
