The greatest legacy one can pass on to one’s children and grandchildren is not money or other material things accumulated in one’s life, but rather a legacy of character and faith. – Billy Graham
After receiving retirement advice from both Noah and Avraham (shout-out to US President Donald Trump) over the last few weeks, I’d like to focus on another aspect of investing that we can learn from our forefather Avraham this week. In this week’s parsha, Vayera, it says: “For I have known him, in order that he will command his children and his household after him, and they will keep the way of the L-rd, to do righteousness and judgment” (Gen. 18:19).
This verse encapsulates Avraham’s mission – not only as an individual, but as the head of a household and father of a people. The Meshech Chochmah points out that this verse is the source for the obligation of chinuch – educating the next generation in mitzvot and values.
He writes: “The source of the mitzvah of chinuch for the positive commandments – its source is this verse from Avraham Avinu, who commanded his children in their youth about mitzvot.”
In other words, Avraham isn’t simply a model of righteousness himself; he is charged with ensuring that his household and descendants preserve a way – a structured path of ethics, justice, and moral service.
Rabbi Aharon Lichtenstein on this verse asks what is the “way of God”? He explains that the simplest way to understand it is to attempt to imitate God, i.e., to act as God acts, in the ways we see described of the Almighty: merciful, compassionate, and righteous.
Moreover, he points out that the classic scholar Rambam in his Hilchot Deot (The Laws of Personal Development, 1:4-6) teaches that the “way of God” is to adhere to the golden mean between extremes: not to live in excess, nor in deficiency.
Avraham builds a family legacy; he instills a way of balanced character and moral discipline; he ensures continuity of values. It’s his “middle of the road,” or balanced, approach that we can apply to investing as well.
We need to have a diversified portfolio. A wise investor diversifies assets – a collection of holdings across different types (stocks, bonds, real estate, alternative assets, and cash), rather than relying on a single “champion” investment.
Relying on one asset class or one security is binary. It is an extreme approach in which either you will hit a grand slam and get very wealthy, or you will strike out and be left with nothing. The more “balanced” approach has you growing wealth over the long term in a slower and steadier fashion.
Rabbi Lichtenstein’s emphasis on imitation of God and on the golden mean teaches us that one should avoid extremes – excessive risk and reckless speculation on the one hand, and excessive conservatism or inertia on the other.
Avraham’s mission was for the long term, so “that he will command his children and his household after him.” Your investment portfolio also should be managed with the long term in mind: not simply chasing quick gains, but rather building a sustainable pathway that can endure market cycles. As I have written numerous times, the pathway to wealth is by “time in the market. Not by timing the market.”
Diversification mitigates 'unsystematic risk'
Diversification is important because markets are inherently unpredictable. No one can consistently forecast which sector, company, or region will outperform in a given year. Economic cycles, geopolitical developments, and unexpected events – such as pandemics or wars – can quickly alter financial landscapes. By holding a mix of assets that react differently to such conditions, investors can cushion their portfolios against volatility.
For example, when equities decline during an economic downturn, bonds or defensive stocks may provide stability or even positive returns, helping to offset losses.
Diversification also mitigates what’s known as “unsystematic risk” – the risk associated with individual companies or industries. While it’s impossible to eliminate market risk entirely, spreading investments among different types of assets and securities can significantly reduce the impact of a single poor-performing investment. It’s the financial equivalent of the old adage, “Don’t put all your eggs in one basket.”
Moreover, diversification provides the psychological benefit of smoother returns over time. Investors who experience sharp portfolio declines are more likely to panic and sell during market downturns, locking in losses and missing future recoveries. A well-diversified portfolio tends to fluctuate less dramatically, allowing investors to stay the course and remain disciplined – key ingredients for long-term success.
Diversification should also take into account an investor’s individual goals, time horizon, and risk tolerance. A younger investor might favor more equities for long-term growth potential, while someone nearing retirement might shift toward bonds and dividend-paying stocks for stability and income. Over time, periodic rebalancing – adjusting the portfolio back to its target mix – ensures that risk levels remain aligned with these goals.
Ultimately, diversification is not about maximizing returns in any single year; it’s about creating resilience. It helps investors weather downturns without derailing their financial plans and ensures that when one part of the market struggles, others may thrive.
In a world where uncertainty is the only certainty, diversification remains the cornerstone of prudent investing – balancing risk and reward to achieve lasting financial security.
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.
aaron@lighthousecapital.co.il
Aaron Katsman is the author of Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing.