Kerri Anne Renzulli |Time.com | March 01, 2016

You might be making it too.

This is part of an occasional series of articles looking at the presidential candidates’ own finances. The first examined Jeb Bush’s portfolio.

Republican presidential hopeful and Texas Senator Ted Cruz is sticking too close to his roots with his investment choices, placing too much of his money in just one economic sector: energy. That’s the collective assessment of several fee-only financial advisers whom MONEY asked to review the financial disclosure documents that Cruz released to the public after announcing his run — and it’s a mistake that offers valuable lessons for other investors, these advisers say.

Born in one energy stronghold (Calgary) and raised in another (Texas), Cruz’s Lone Star streak appears to have had an outsized impact on his finances. The senator’s heavy portfolio of oil- and gas-related holdings puts him at risk during the industry’s boom and bust cycles, advisers note.

It seems that Cruz has taken to heart Peter Lynch’s advice to “buy what you know.” The GOP candidate has between $365,000 and $850,000 of his portfolio in just six holdings, all oil and gas related: Chevron, Exxon Mobil, One Gas, Oneok, Enterprise Products Partners and Plains GP Holdings. His and his wife’s total investment portfolio, excluding their children’s 529 plans, could be worth between about $1.2 million and $2.8 million. (Candidates disclose holdings within wide ranges, making it hard to be more precise.)

Compounding the problem, Cruz also invests in several large-cap and target-date funds that probably have Big Oil holdings. That could make his exposure to energy stocks huge, says Redondo Beach, Calif., financial planner Scott Leonard.

Hometown Bias

As it turns out, the senator is not alone in his preference for stocks that have big local impact. Americans across the nation are guilty of the same hometown slant, according to data compiled by SigFig, an automated portfolio management company.

For example, Texas investors like Cruz are 30% more likely to be invested in oil, and have 5.3% of their individual stock holdings in the sector vs. 4.1% nationally, SigFig finds. Investors in Michigan, meanwhile, are 86% more likely to invest in the auto industry than the average American — holding 5.5% of their stocks in automakers, compared with 3.3% nationally. (The SigFig analysis includes only individual shares, and not stock held through mutual funds or ETFs.)

And in Washington state — home to Microsoft, Amazon and other high-tech firms — investors are 35% more likely to be in tech, with 18.9% of their stock holdings in this sector; the average American only has 10.9% of their stocks invested in technology.

While a home team bias may be harmless when it comes to sports — Cruz apparently favors the Cowboys — it can spell trouble “bigger’n Dallas” for returns when the segments you favor have lackluster performance; think about the recent drop in oil prices.

“This could be one reason why in the last two years, the median Texas investor has underperformed the median U.S. investor,” says SigFig analytics director Benny Wijatno. Over the 12 months ending Feb. 26, the median return in Texas was -9.1%, compared with a national median return of -8.5%. And from February 2014 to February 2015, the Texas return was 4.8% vs. 5.7% nationally.

Lack of Diversification

The best way to improve those results, advisers note, would be to reduce heavy exposure to just one sector of the economy. If selling off the individual holdings would create a painful tax hit on capital gains, or ugly losses — either is possible, depending on when Cruz acquired the investments — the solution is to instead work to diversify your portfolio.

Cruz does seem to make an attempt at this, but ends up with a bit of a Texas hash of overlapping mutual funds and target-date funds. “If he is [making additional investments] for diversification out of the energy sector, why buy funds that are still buying energy stocks?” asks Leonard. “If he wants to diversify, then diversify with intention.

“He hasn’t looked at his portfolio holistically,” Leonard speculates. “If he had, he would see his stocks are overlapping.”

Cruz has fallen victim to a common investing myth: Buying a lot of different funds doesn’t in itself create portfolio diversity.

“People think that more funds means more diversification,” says Lake Oswego, Ore., financial planner Joseph Alfonso. “In fact, the opposite is more likely — given that the more funds one holds, the more likely it is that they each hold the same companies. This lowers diversification and increases volatility, in addition to adding management complexity.”

Makeover Strategy

Investing in individual stocks is always a riskier bet than putting your money in a broad-based index fund or ETF, advisers say, so if Cruz wants the surest return for his money, he should look into owning a couple of low-cost ETFs.

Doing so could also help him politically, points out Pewaukee, Wis., financial planner Kevin Reardon: “Owning individual stocks creates potential conflicts of interest for a U.S. senator, much less a president.”

But the advisers point out that Cruz clearly wants a strong energy sector component in his portfolio — so they suggest that he mitigate risk with a different approach to diversification, pairing his oil and gas holdings with investments that will balance out his overall holdings.

“He should try and find investments that have good expected returns … but have very low correlation to energy,” says Leonard.

Cruz should consider a fund that focuses on small-cap value stocks, says Leonard. And because the presidential candidate has a relatively small proportion of his investments dedicated to non-U.S. companies, he should shift a greater portion of his assets into international holdings, says Fairview Village, Pa., financial planner Jeremy C. Brenn.

Finally, Cruz needs to ditch his target-date funds, Leonard notes. These funds are meant to be one-stop shops that will give you a diversified portfolio in one fund — so once you add other investments into the mix, he says, the target-date strategy becomes less effective.

“He has made very deliberate decisions regarding his energy investment,” say Leonard. “His goal needs to be to diversify around those decisions, and a target fund won’t do that for him.”

This article first appeared at Time.com on March 01, 2016.