Don’t Put All Your (Investment) Eggs in One Basket

There is a reason that old sayings exist.  And that is – there is usually a big element of truth in them.  In terms of the saying, ‘don’t put all your eggs in one basket’ – it applies to many things in life from applying for more than one University, or more than one job to launching a new product or service in your business.

As parents, the advice you would give your kids is not to only apply for one University – just in case you don’t get offered a place there.  You need alternatives.  If you have a good mix in your list, then something will pay off.

When it comes to investment it is a similar story and the Eggs in One Basket analogy is very apt.

Why Spread Investments Around?

Just because one company's value has been good for a couple of years – it doesn’t mean it will always perform that way.  Or going wider – just because the stock market is doing well (or badly) doesn’t mean the same will be true next year.

In someone invested all their funds into ONE company and then – at the time they really needed to take their money – that company had a downturn – that can wipe a large amount off the value they were expecting.  It’s all about timing!

Within the stock market itself – a portfolio spread across a range of opportunities is generally more resilient over the long term than relying on just one or two companies.

The same applies to investment opportunities generally.

Some investors prefer to have an even more mixed portfolio.  They might choose to have money in physical property, or commodities (gold, silver, wine), as well as the stock market.  Within their fund types they might like a mix of home and foreign markets, a variety of sectors or types of funds.

Of course, it will depend on their feelings about risk.  The higher their tolerance for risk – the more potential the return, but the higher the risk of loss too.  And their risk tolerance may also change over time, and become less – or more – as they get closer to retirement.

It is all very individual and there are a myriad of different ways of putting a portfolio together. So may variants.  So many possibilities!

The important thing is to think about your finances on a regular basis and have an expert help you with your thought process.  Making sure you choose an independent financial advisor will ensure you have the widest variety of options, as they are not tied to particular schemes or companies.

And ensuring you go a trusted source – either someone who you or your friends and family have (good) experience of – or someone who is part of an independent review organisation – like Vouched For – can be important for your peace of mind.

If we can help – or you have any questions at all – email chris@macfinancial.co.uk

Read more about long term investing here. 

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