What it is: An analysis of your "Single Points of Failure." This marker identifies if your wealth is overly dependent on a single company, a specific sector (e.g., tech or commodities), a single geography (e.g., all real estate in one city), or a single source of income.
What it tells you: It measures your Fragility. Concentration is how wealth is often created, but diversification is how it is preserved. This marker reveals whether a single "Black Swan" event—like a sector-wide crash, a local real estate correction, or a job loss—could permanently derail your entire financial future.
Why This Matters Financially
In a resilient system, when one part fails, the others remain standing. If your assets are highly correlated, a single event can trigger a "domino effect" across your entire balance sheet.
The "Correlation" Loss Example:
Imagine a consultant whose life looks like this:
Income: 100% dependent on one high-paying, volatile industry.
Investments: A portfolio heavy in equities from that same industry (the "invest in what you know" trap).
Real Estate: Multiple rental properties, but all located in the same city where that industry is the primary employer.
The Event: That specific industry faces a downturn.
The Income Hit: You are laid off or your consulting contracts are canceled.
The Portfolio Hit: Your stocks in that sector plummet simultaneously.
The Real Estate Hit: Local demand drops, vacancies rise, and property values stall because the local economy is struggling.
How You "Lose" Money:
The "Locked-In" Loss: Because everything is down at once, you have no "safe" bucket to pull from. You are forced to sell your best long-term assets at a massive discount just to cover your mortgage.
The Opportunity Vacuum: When a crisis hits, the best deals appear. If your capital is "stuck" in concentrated assets that are currently underwater, you lack the liquidity to buy when others are fearful.
The Risk: You lose money through structural correlation. If your job, your stocks, and your home all depend on the same "economic weather," you aren't an investor—you’re a gambler. True wealth requires de-coupling your lifestyle from your legacy.
