Written by R. A. Stewart
“Have your money in several places because you do not know what kind of bad luck you will have.”-Ecclesiastes: 11:1-2
Solomon was saying we should all diversify our savings in order to protect us from uncertainty. None of us have any control over the uncertainties of the markets but we do have a say on how to react to what the markets are doing.
The first thing to do is to diversify your investments in order to lessen the impact of a market meltdown.
If you are just starting out in life and don’t have that much savings this can be applied by investing in managed funds. This is a type of investment where your money is combined with those of others. You may have a piece of a number of companies. This lessens any impact of any company falling over.
If you were to just save up your money and invest it all in the one company you are putting yourself at a greater risk because the company may have a bad year with its share price losing half of its value.
Investing all of your savings into the one company is called “Placing all of your eggs in the one basket”, it is risky. Sometimes this type of investing pays off but when it does not the results can be catastrophic for those who lost their life savings.
You sometimes hear about the success stories of so-called gurus but not the Mum and Dad investors who tried to do the same thing as the rich gurus and lost.
It is important to invest according to your own personal circumstances and your own goals and not be persuaded by anyone else to invest in this and that.
Whenever there is a chance for a capital gain there is also a chance for a capital loss, therefore your strategy has to allow for the possibility for a capital loss. If you are saving for a car and expect to withdraw the money within 2 years you certainly would not invest in growth funds which are high risk, high return because you may find that your balance has dropped significantly just when it is time to withdraw the money. Growth funds are a more appropriate investment for your retirement fund when you are young and have decades ahead of you.
Your financial portfolio should be a mixture of different types of investments which reflect the goals and purposes of each fund. This could be your emergency fund, saving for a house deposit, car, or overseas fund, retirement fund etc.
As Ecclesiastes says, “Invest in different places, you never know what kind of bad luck you may have.”
About this article
The contents of this article are of the opinion of the writer and may not be applicable to your personal circumstances therefore discretion is advised. You may use this article as content for a blog/website or ebook.
Read my other articles on www.robertastewart.com
Tired of seeing your bank charge you $5-10 every time you withdraw cash abroad PLUS that hidden foreign transaction fee? 🤯 That’s money that should be buying you a gelato, a beer, or a souvenir. Wise gets you the real mid-market exchange rate with only tiny, transparent conversion fees from 0.42%. Stop funding your bank’s next vacation. Fund yours. 👉 Link in bio to get your Wise card!
#TravelHacks #WiseCard #NoHiddenFees
