Don’t Keep All the Eggs in One Basket – Diversification
This proverb “Don’t keep all the eggs in one basket” in the context of diversification in financial management basically means that if you are looking for securing your future earnings it is not advisable to invest only in one kind of stock in one company. If this company sinks it is going to sink your entire investment too. It is better to invest small amounts in different stocks of different companies with different levels of risk. As the profit and loss made by the different baskets of investment will neutralize the sinking of one stock with the profit made by another stock. Thus providing cushion to the investor. This kind of diversification of risks is one of the major reasons behind the success stories of various mutual fund investments standing the test of time.
The proverb can also be seen as a warning not to be dependent on a single resource. It is better to diversify savings in different avenues so that if one avenue faces loss other investments are not put at risk.
In order to build wealth, you must save money. I make sure to save on a regular basis and arrange the cash into different investments. Following these suggestions will definitely be a favour to your future self and as they say ‘The Early Bird gets the Worm.’ Hence the sooner you delve in diversification of your wealth the higher will be the returns to the same.