Everyone knows that old adage: Don’t put all your eggs in one basket. You don’t want to be that person who only relies on one source of income, only to go bust as the source dried up. You also don’t want to have a desk job and then support a losing business. That means that it will just be all your hard work down the drain. What you want is to learn the art of diversification. Placing your money not just in businesses, but also in different vehicles.
What is diversification?
Diversification is investing your money in several vehicles. Vehicles meaning a whole variety of products, businesses, or currency with the intention of gaining more money. In going back to our idiom of putting your eggs in one basket, eggs = money, basket = vehicle, lots of baskets = diversification.
Why diversify?
You want to lose money? Don’t diversify. I had a friend who opened a trust account with the biggest bank in the Philippines and promptly forgot about it for a few years. He thought that with the best money managers, he would be flush with cash. He invested a large amount of his retirement fund and he chose a moderate risk fund. Big mistake. After five years, his money shrank. Like no interest gained, a bit of capital loss, and to top it off, he had to pay the trust fees.
Another prime example of why you should diversify is overseas workers who invest their earnings in one business. If that business went belly up, all your savings go kaput. Why not invest in two different kinds of businesses? Or spread the risk by putting some money in the stock market. There are myriad ways of diversification.
How do you do money diversification?
It’s as simple as dividing it up. In plain English, put some here and put some there. Don’t limit your choices to businesses or franchises that you can invest in. Look into the stock market, bond funds, and even currencies. Bitcoin is a currency that’s hot right now, although with all cryptocurrencies, invest only what you can afford to lose. Ultimately, with diversification, you lessen the possibility that all your eggs (money) will break if one basket is broken.
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