Diversify Diversify Diversify
Written by R. A. Stewart
“Put your money in several places-many places, in fact-because you never know what kind of bad luck you are going to have in this world.”-Ecclesiastes 11:2
The number one rule when investing your money is to diversify. That is to invest your money in several places. To invest money in one place is called “Placing all of your eggs in the one basket”. This is also known as speculating.
During the 2007/08 Global Financial crisis there were people who lost their entire life savings when the company which they invested their money with went into receivership. The companies concerned were offering high interest rates to investors.
There are sometimes stories floating around of people who made a fortune on the share market by investing in one company. That is all very well when it comes off, but such investors will try the same thing again and again and again and give up their gains plus a lot more.
Greed is what gets the better of some people. If you are going to speculate then do it with discretionary spending money. This is money you may have normally spent on entertainment, your hobbies, eating out, gambling, and the like.
Your retirement fund should not be used for one of your get rich quick schemes such as playing with the crypto market. That should be done separately.
Diversification is more than just spreading your portfolio among different companies, it is investing in different platforms. Investing your life savings in sharesies or robinhood is not diverse even if you were investing in a range of companies. You just don’t know what will happen to these platforms in the future.
The same thing applies when investing in crypto-currency. Don’t invest all of your bitcoin with one bitcoin exchange but spread it around among several to reduce your risk. But remember, Bitcoin is volatile so only play the crypto market with discretionary spending money.
Invest in different types of industries such as power companies, banks, insurance companies, farming, etc.
In order to grow your wealth it is necessary to take calculated risks, not reckless ones. Share market investors have the option of investing in individual companies or managed funds which are a form of diversified investment. In this age it is possible for investors to deposit money into an online share market platform and purchase shares into individual companies for a minimum amount. This enables the ordinary man or woman in the street to get involved in the markets.
Hands-on investing will not only help you to grow your wealth but it also increases your financial literacy. With plenty of experience behind you there will be fewer mistakes as a result of better decision making.
Always remember that whenever there is a chance of a capital gain there is a chance for a capital loss. Your retirement fund balance may be down as it will be from time to time due to the volatility of the share market but that does not mean that you have lost money. It is the nature of the ups and downs of the markets, Get used to it!
You don’t have to be rich to invest but you have to invest to get rich so what are you waiting for?
About this article
This article is not financial advice and may not be applicable to your personal circumstances therefore discretion is advised. You may use this article as content for your blog or ebook.
Read my other articles on www.robertastewart.com
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