Concentration: A Haunting Risk to Your Life’s Investment

If standard personal finance advice is to diversify your investments, might we apply the same reasoning to our most concentrated relationship investment?

Happy Halloween! As I mentioned last week in The Social Index Fund, today I want to discuss what might be the greatest single risk within your social life that can spread like a virus to the rest of your life. It belies the most frightening money risk to your financial independence once you’ve reached it.

In your younger years, you might discount this horror—understanding that it’s like the monster under the bed—always there, but unseen and something you can convince yourself isn’t real. It’s far off, in some ethereal place for your future self to deal with. But by the time you’ve aged and FIRE starts feeling real, so too might this nightmare.

Concentration vs. Diversification

Standard personal finance advice is to diversify your investments. You’ve heard this a million times across podcasts, books, and respected financial outlets.

But why?


The reason is simple. For most folks, reaching your money goals can be done by combining your labor-related income and a reasonable expectation of average investment returns over a fairly short period of time.

What’s that mean?

Save 15% of your paycheck starting at 21 years old and keep doing that until you’re 64. Put the savings into a broad stock market-tracking index fund like VTSAX. Boom, you’re ready for retirement.

43 years of work sound like too much? Just tweak your savings rate!

Save 50% of your paycheck starting at 21 and you’ll be ready to exit the workforce at 38 years old! That’s not far off of what we did. You can play with this calculator to try other combinations, too.

And of course, diversifying your “investments” applies to much more in your life than just money.

But what about when you absolutely need to reach a larger goal, faster and can’t invest any more of your income, energy, or emotion?

That’s where concentrating your investment becomes the goal many folks reach for.


Look, if you’ve got an income of $50K/year and your goal—for whatever reason—is to reach $1M in five years, you’re just not going to get there by investing in diversified ETFs or mutual funds.

Going back to 1930, here’s the top-performing S&P 500 years and their annual growth rates:

YearAnnual % Change

Those are some incredible investment years with absolutely massive growth.

But let’s say you take your $50K and somehow avoid all taxes while simultaneously living life completely free. I assume you’re living in a handmade yurt out in the wilderness, chopping trees for firewood, and picking berries to stay alive.

Whatever the case, you invest your $50K/year of tax-free income and happen upon investment years of equal incredible performance. Where are you five years later?

YearAnnual % GrowthInvestment Value

You’ve got a bundle of money, but you’re still miles from a goal of $1M!

Meanwhile, take a look at an individual stock like Tesla Motors. Without including 2021’s stellar performance (so far), this is $TSLA’s top years:

YearAnnual % Change

And what happens when you take your $50K income during your wilderness survival and somehow catch returns equal to Tesla’s best years?

YearAnnual % ChangeInvestment Value

You’d 5x your goal of $1M!

Notably, you’d outperform your S&P 500 investment by some 1,773%!

Diversification is the problem when you’re aiming to hit one out of the park. And that applies to more than just money. Hear me out, we’ll get there.

What’s your goal?

Investing $50K/year over five years into the S&P 500 is almost certainly not going to get you to $1M by that fifth year’s end.

Investment diversification, by its nature, reduces the range of potential growth.

But is that really the goal you have to have? Something so extreme?

Have you taken a moment and contemplated how much money is really enough for you?

I can’t answer that for you. And while I’ll push you to really analyze what’s important to you and see if it’ll fit into a more reasonable timeline to reach your financial goals, that doesn’t mean it’s what’ll work for you.

You don’t become a billionaire by diversifying your investments and shooting for a 10% return/year. Unless you’re already making hundreds of millions I suppose (hi, consider a donation to our Reader Fund)!

But this post isn’t actually about your financial investments. That’s just the tool to get you into the right mindset.

It’s about something far more dear to nearly everyone’s life.

Your Social Investments

Your overall well-being is almost certainly driven deeply by your emotional well-being. And that is dependent on your social relationships.

As we strive for financial security we might shed some of these relationships. It’s not uncommon to feel a bit lonely in the pursuit of FIRE. It’s tough to find a balance between saving and spending—especially where it might also mean eliminating social events and engagements (as steep as those restaurant and bar tabs can be, what you’re often paying for is relationship maintenance).

Actually becoming financially independent might make you lonelier still as you consider shedding your identity as a worker and all the peer relationships that go with it.

You can let all this kind of “happen” in the background as you progress through to early retirement, or you can take your social investments by the reigns and intentionally, actively work to ensure you still have friends, peers, and mentors in place to support you throughout your life’s interests, hobbies, and challenges. That’s the basis of last week’s post on building a social index fund to combat the natural progression that occurs as traditional work dissolves from your life.

But there’s one spot within your relationships where the risk and significance are the greatest. The one that means the most!

Your “everything”?

As we reach our money goals and redefine the level and variety of “freedom to”s we have in our life, we’ll shed some relationships and empty the roles they used to fill.

What about just making your significant other fulfill all those roles? Couldn’t they just be your confidant, exercise coach, intellectual challenger, emotional support, and hobby partner?

It sounds a little silly when you say it like that, doesn’t it?

But how often do you hear partners in a relationship proclaim how the other one is their “everything”?

Retirement can create over-dependency

Rob Pascale, the author of The Retirement Maze, asserts that it’s all too often exactly what people do!

Then there is the issue of social over-dependency. Psychologists assert that being socially connected is essential for mental health, and we found that happily retired couples have active social lives with lots of friends.
A certain amount of social dependency is reasonable. But for some wives dependency can become extreme. In fact, we found that many men expect to be the primary focus of their wives’ attention when newly retired. This of course is not at all realistic nor is it healthy for either spouse. And many wives might become angry and resentful if they have to surrender more of their personal time than they’d like to.

Source: Interview with the authoring team on HuffPost and Death and Divorce and Unhappiness

Turning your partner into the source of too much more than just your romantic satisfaction seems to be a recipe for disaster.

It’s easy to retreat into your partner—concentrate your investment in them—and become dependent.

Rob is writing in the context of retirement and how relationships change. However, this same general trend of merging your romantic partner with your best friend and a million other desires seems to be common in modern love.

Social diversification and over-dependency

Esther Perel, a well-known (if controversial) Psychotherapist, asserts that our over-dependency on our romantic partner is precisely what might be pushing us apart:

These expectations are extremely difficult for us to provide to one another because they are contradictory, or even in some cases incompatible. I write in The State of Affairs that, “contained within the small circle of the wedding band are vastly contradictory ideals. We want our chosen one to offer stability, safety, predictability, and dependability… and we want that very same person to supply awe, mystery, adventure, and risk.”

The solution? I think Esther would agree: build your social index fund!

Research shows that people who have more social resources, and more people to talk to about various issues in their lives, do better in marriage. So in what areas do we want to invest with our partners, and in which areas do we need to invest in ourselves and our personal networks?

Source: Why Modern Love is So Damn Hard

Do you have a variety of trusted friends and relationships to talk to about life’s challenges along the way? Have you created a diversity of relationships to be invested in and rely upon?

Are you dependent upon your partner as the sole source of comfort and confidence when life confronts you with its greatest quandaries? Have they become your “everything” to such an extent that their direction and their happiness become yours?

Professionals and research seem to suggest that if you want to protect and nurture your dearest relationship, the one filled with genuine and holistic love, one of the best ways to do that is to have a diverse set of relationships to depend on outside of them!

Does your relationship dependency risk you going full Mad Hatter?
Does your relationship dependency risk you going full Mad Hatter?


All too often, we pin our emotional and relational needs in ever-increasing number on our romantic partner. Financial independence and early retirement can easily be an impetus to push even more onto your mate.

Divorce is practically endemic to personal finance writers.

And while I don’t think a social index fund can save us all, I think it can help—at the very least, to survive the fallout.

Sometimes, it’s just unavoidable as Mr. Money Mustache said:

…Sometimes people just grow apart over the decades and no matter how much they work at the relationship, find that they want different things from life.

Source: The Economics of Divorce

Even my personal money inspiration to get the ball rolling on financial independence, J.D. Roth of Get Rich Slowly, was unable to dodge separation. What I think is likely this year’s most inspiring FIRE story came from an old veteran with a brutal breakup right in the middle.

I think there’s a real risk to achieving financial independence and finding that all those “freedom to’s” I wrote about a few weeks ago don’t mesh with your partner’s own conception of an ideal future.

And while no amount of friends will block such a chasm in your life, they just might make it bearable. Perhaps more importantly, something you can recover from.

Just like a stock index fund, a social index fund’s purpose isn’t necessarily to stop you from ever losing. It’s to avoid bankruptcy. To not reach zero.

Concentration’s Risk

Just as popular media might have you concentrating your financial investments into something like GameStop, you might find yourself doubling down into your romantic relationship as your social circle evolves on your path to FIRE.

While concentrating your energy into one relationship could create elation at its peak, it leaves room for disaster and depression at its trough with dependency at its core.

It’s the very mania that diversification exists to squelch; the risk a social index fund can defend against.

But, at the end of the day, people and love aren’t stocks and annual change percentages. Your romantic partner will always weigh heavily on your contentment and satisfaction with life. I’m not advocating for polyamory here, but rather intentionality with what you choose to depend on your partner for. Should they be your “everything”?


I’m expecting some differing opinions on this one. We all treat romantic relationships, and relationships in general, quite differently. How do you balance your dependence on your partner with independence more broadly in your life? Are they the place where “concentration” trumps “diversification”?
Leave a comment below!

If you enjoyed this post, consider subscribing via email to receive TicTocLife's infrequent newsletter for more on how your financial life crosses with money psychology and day-to-day FIRE strategy!
Want to try before you buy get for free? Read the Newsletter Archive!

By Chris

Chris began his financial independence pursuit in 2007 as he learned basic personal finance from Get Rich Slowly as an aspiring web designer and novice investor. After several missteps, he learned the secrets of financial independence and began his pursuit of freedom.

He reached financial independence in 2018 with $1.2M and two businesses. He began the process of transitioning to early retirement in 2020.

Learn more: Meet Chris.

7 replies on “Concentration: A Haunting Risk to Your Life’s Investment”

Interesting follow up article to the Social Index. Agreed with the general points made here and, again, while made in the context of FIRE, it also applies to all we humans. Intuitively, I think we all know that one person could never and should never provide for all of our numerous & varied needs, but many fall prey to the romantic notion of “The One” which has been consistently propagated throughout history in literature, film, etc. And while there certainly can be (and is very nice to have) a primary person, such as a spouse/significant other/romantic partner, we all still need to diversify our Social Index in life to have our many and varied needs met. That’s what family, friends, collaborators, co-conspirators and even co-workers are/can be. As you point out, the “all the eggs in 1 basket” strategy is rarely a great one, particularly with human relationships. As you also state, having a diverse social network to fall back and rely on in times of calamity is absolutely a wonderful thing.

With respect to the “divorce is practically endemic to personal finance writers” comment, I’ve not seen any empirical data or evidence-based research to substantiate that the divorce rate is disproportionately higher for us than the U.S. norm. If anything my half-assed, anecdotal opinion is that it’s likely lower.

Like a lot of parts of life, we’ve been sold an idea (not unlike the “American Dream”) that we ought to get quite a bit from our partner/”the one” as you said. Perhaps everything.

That’s a lot of stress and expectation to put into a single relationship. I think that’s hard. Especially when there are so many beautiful, wonderful people to meet and know and find common interest with or just points where you “click”. To expect that from your partner across all manner of interests, not to mention also romance, just seems like a lot.

“Writers” alone might disqualify my comment about endemic divorce when I think about it. I’d imagine divorced folks might be less apt to talk publically, generally, about such an experience. Perhaps it’s just some of the “bigger” folks so it seems to hit a bit harder. And, naturally, when it happens, it’s more memorable than all the others doing just fine in their relationships. 🙂 Good point.

Oh, and of course, within the realm of personal finance writers — money is typically a significant friction point in relationships. You’d think PF folks would at least have less to worry about there (and be more successful because of it!).

Concentration / diversification risk is certainly everywhere around us, not just in investments.

I’m jealous that Mr. 1500 has $1MM just in his Tesla holdings alone. I can’t imagine where I would be had I just mirrored his Tesla trade back in 2012.

Yup! It can cut both ways. Carl has had some tremendous luck with $TSLA for sure. Of course, there are lots of folks who have gambled on a deep (and concentrated) bet and lost it all. Naturally, we don’t hear so much from them. 🙂

This is a very interesting way to think about relationships with our partners: as a piece of our portfolio in our social index.

The thing is: with concentration in stocks, you can get an outsized return that an ETF cannot possibly provide (ask DFV from WallStreetBets). But is there a similar analogy here for a partner where concentrating on a partner can give you significantly more utility than if you were to create some distance?

Though I’m overall in agreement with this. If 2 partners are very dependent on each other, they’ll get their perspective somewhat warped. Should the 2 have an argument, it’s quite easy for things to circle out of control.

But if each of he 2 partners have friends that *aren’t* just enablers, it seems there’s a lot more perspective and experience the 2 partners can source (i.e. from their network) in order to solve any bottlenecks/problems the relationship would have.

I’ve never thought about my relationship w/ my partner this way and is definitely something I should pay closer attention to.

Hey Angie! Thanks for the thoughtful comment 🙂

That’s a good question about potential and putting all your energy into your partner. I think, to your point, there’s a possibility of that sort of “out size return”. I’m not too sure what that might look like. A deeply intertwined life. Codependency. Perhaps a very deep and meaningful relationship.

But, as you alluded to, it opens up each person to the possibility of losing their “everything” while simultaneously not having more points of view to survey and discuss within their social circle. Which, presumably, can make the relationship weaker.

It’s a fun way to look at it and evaluate where you’re at. Hopefully, it offers a moment to think and possibly recognize where a change could be healthy 🙂

Interesting series, Chris! I enjoyed this and the previous post, and indeed found some of the initial loneliness during my transition to early retirement last year (which, coincidentally came at the start of the pandemic). Moving across the country and years of working long hours left me neglecting previous relationships and hobbies, so it’s been like starting over. And while I find everything I need in my spouse and we are truly best friends, I know that over the long term that’s not healthy for either of us. And so, I’m working on diversifying my social index. Hopefully as the fear of the pandemic lessons, I’ll be able to get past my introverted tendencies and lean into to my interests/hobbies to build new relationships. Thought-provoking read, as always!

Leave a Reply

Your email address will not be published. Required fields are marked *