There is a phrase about having to place all your eggs into a basket, some people believe that it is safe and others believe it is highly unsafe to do so. In this post, we will be exploring the difference between diversifying our income and making just a single investment.
Investors who diversify their income, do so as a form of risk management strategy. A diversified portfolio is a mixture of different assets, those who practice it, do so based on the fact that one of their investment may not go as planned and another one would cover to give profit. Let me give an example to help buttress this point further, as an investor your major investments are in two major companies; the first company produces an umbrella, while the other company produces baby food. Let's say the umbrella company is not doing so well in one season, the baby food company could conveniently help you ensure that your investment wallet is up to a reasonable income, that way there is no complete loss, so imagine what could happen if you have a long list of investment where one would substitute one for another.
There are also periods when investments fails, and there is loss of funds completely, in this case once again, investment diversification has proven to be of great necessity, when funds are lost or there is a record of loss with one investment, you certainly have another investment to cover up for the loss.
However, there are people who do not believe in investment diversification, according to the people who fall into this category, they just want to get a project that they absolutely believe in and put all they have into it. These people do not believe in any need for diversification because according to them, everything could fail and then, they would be in even more trouble. So, they make adequate research about a project, when they are sure it is something they want to invest in properly weighing it's pro's and cons, they go all out and put their funds into it, if it fails then it fails and if doesn't then it's fine by them.
The question to you my lovely reader is, after carefully looking at these options, which would you rather prefer as an investor, are you alright with putting all your eggs in a basket or you would rather split your investment funds?
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