In the summer of 2007, David Dziekanski was a 21-year-old intern at Bear Stearns. At the end of a lunch-and-learn on mortgage-backed securities, he stood up in front of about 300 people and asked a simple question: why does pooling mortgages together make them less risky? If they start to go down, wouldn’t they all go down together?
The room laughed, and the question never got an answer. Less than a year later, Bear Stearns was sold to J.P. Morgan Chase for $2 per share to avoid bankruptcy.
On Episode 136 of the Tall Oaks Podcast, Branden DuCharme, CFP®, CMT®, sat down with David, now founder and CEO of Quantify Funds. They talked about why that question still matters for anyone who thinks owning the S&P 500 means they’re diversified.
What 500 stocks can protect you from, and what they can’t
Diversification is good at one job: reducing the risk that a single company sinks your portfolio. Branden explained that if you own 500 companies, one going bankrupt barely registers.
What it can’t remove is systematic risk, the risk that hits everything at once. Branden compared it directly to the mortgage bonds of 2007. Pooling protected investors against any one homeowner missing a payment. It didn’t protect them when many homeowners stopped paying at the same time.
The same is true of a stock index. “The S&P 500 can still have a massive correction and a detrimental effect on people’s financial plans long term,” Branden said. “Not all things are safe just because there’s more of them.”
Concentration adds to the issue. As of July 2026, the top 10 stocks made up roughly 43% of the S&P 500’s market value, a record high, according to RBC Wealth Management data cited by InvestmentNews.
Why inflation hedges haven’t behaved as expected
David’s interest in scarcity assets such as gold and Bitcoin comes from his view of currency debasement. He believes central bank balance sheets that grew as a last resort in 2008 and 2009 have become “the new normal.”
So why haven’t those assets surged with inflation? In David’s view, 2026 gave investors strong alternatives. Equities saw large productivity and earnings gains tied to expectations for AI, and higher interest rates meant bonds and cash paid more. Assets that produce no income have a harder time competing in that environment. He also stressed that no one can predict with certainty how a single asset will behave, which is why he looks at gold and Bitcoin together, as two independent bets.
Branden’s summary: these aren’t perfect hedges on a daily or weekly basis. Their role is long-term diversification.
Return stacking: changing the hurdle, not removing the risk
One idea the conversation spent time on is return stacking, also called portable alpha. Instead of selling stocks to make room for an alternative like gold, a portfolio uses modest leverage to hold both.
Branden explained the trade-off in terms of hurdle rates. If the leverage costs roughly 4–5%, the added asset only has to beat that borrowing cost, not beat stocks. If it has low correlation to the rest of the portfolio, it can also add diversification.
But he was clear about the limits. “It’s still riskier than having just less stocks and adding some gold, for sure,” he said. “I want to be clear about that.”
Alpha vs. beta: a high school equation
Branden used slope-intercept form from high school math, y = mx + b, to explain portfolio returns. Your expected return is your market exposure (beta) times the market’s return, plus whatever extra value a strategy adds (alpha). Alpha can also be negative.
The catch is that leverage can look like alpha. If a strategy simply holds 1.5 times the market’s exposure all the time, it may beat the index in good years. That isn’t skill; it’s more beta. David put it this way: you have to be careful when alpha “can be increased beta in disguise.”
Covered calls vs. put spreads, in plain English
Covered-call funds became popular for their income. Branden’s concern is the trade-off: you give up much of your upside in exchange for steady distributions, while keeping most of the downside risk.
A newer approach pairs stock exposure with a put spread. Branden’s analogy: you own your house, and you sell your neighbor fire insurance, then buy some reinsurance to cap your risk. You collect a premium in good times. But if your neighbor’s house catches fire, it may spread to yours, and both lose value together.
Branden was explicit that he wasn’t endorsing either strategy, only explaining how they work. In many cases, he noted, these approaches are “likely just adding a bunch of beta to your portfolio.”
Sector tilts, and when to keep it simple
Branden shared how he thinks about capital efficiency across sectors. Some sectors, like technology, tend to move strongly with the market. Others, like utilities and energy, have historically had lower correlation to it. Pairing the two thoughtfully can change how a portfolio behaves.
His advice for most people was simpler: “If that sounds confusing for you, just buy the index.” The index isn’t bad for most investors, especially those who don’t fully understand the sector bets themselves.
The takeaway: recalibrate before year end
The common thread in this conversation is understanding what you actually own and why. Branden’s closing advice: year end is a natural time to review your portfolio, so you know it still lines up with your goals, objectives, and financial plan.
If you’d like help reviewing how your portfolio is diversified, schedule a conversation with the DuCharme Wealth Management team.
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