Good asset allocation is like good editing.

October 10, 2025

One of my favorite college classes was a playwriting elective taught by a no-nonsense professor named Anna Dolan. During one memorable critique, she advised me to edit out a scene I had labored meticulously over for weeks. “But that’s my favorite part,” I protested. Her response was terse: ‘honey, sometimes you gotta kill your darlings.’

If you’ve never suffered the illusion of becoming a writer, ‘kill your darlings’ is editing advice that means you should be willing to cut out your favorite scenes, dialogue, or characters if they don’t serve the overall narrative. It’s natural for writers to get attached to certain elements of their work – it’s their creation, after all. This is why we have editors. A good editor knows how to stay objective during revision so that only what’s essential remains.

In many ways, good asset allocation is a lot like good editing – what matters most is doing what’s essential for the whole. When a client transfers assets to One Day in July, we carefully review their investments and evaluate whether these holdings are serving the client’s financial goals. When the answer is no, we may recommend selling investments to reconstruct the portfolio and optimize results.

In tax-advantaged Traditional and Roth IRA accounts, this process is often quick and painless. With taxable accounts such as brokerages, it can be decidedly trickier. In these instances, we review each individual holding and evaluate whether it serves the client’s long-term interests in terms of performance, cost, risk and tax-efficiency. When prior holdings don’t meet our criteria, we may advise selling them and incurring a capital gain so that we can better position the portfolio for the long haul.

Selling a security and incurring a capital gain now in the hopes that it will improve performance in the future feels uncomfortable because markets are inherently uncertain. This is what’s known in behavioral economics as the sunk cost fallacy: humans are hardwired to avoid a definite, immediate cost now (paying taxes), even it if means potentially facing a bigger, more abstract cost in the future (the opportunity cost of holding underperforming assets).¹ What’s hard to internalize is this: your future self will feel pain just as acutely as your current self – perhaps even more so, as many of us have a lower risk tolerance and capacity for loss later in life. A good financial advisor takes the long view, which means sometimes we advise our clients to incur a little discomfort now to better position their assets for long-term results.

On The Bookshelf: I’m going to cheat a bit this month and recommend a book that I haven’t read in full. Morgan Housel has just released The Art of Spending Money: Simple Choices for a Richer Life. In finance, we talk a lot about investing and we probably don’t talk enough about spending. Yet in terms of your overall relationship to money, they’re two sides of the same coin. One of the books that made me want to be a financial advisor was Housel’s The Psychology of Money (2020), so I can’t wait to fully read and digest his latest work. If you’re interested, you can listen to him read Chapter One for free in the podcast link below.²

- Seth Gillim

1. Nudge: Improving Decisions about Health, Wealth and Happiness, by Richard Thaler and Cass Sunstein, 2008.
2. https://podcasts.apple.com/us/podcast/out-now-the-art-of-spending-money-first-full-chapter-here/id1675310669?i=1000730543743