Put Your Best And Only Eggs In One Basket

Over diversification:

Do not put all your eggs in one basket. In finance, this translates to do not put all your money in one company.

Why not?

If you decide to open your own business, you are completely exposed to all types of risk. You are ultimately putting all of your eggs in one basket. If it goes belly up, your financial life most likely will break havoc, but you do not necessarily open or buy multiple businesses at once with the idea of diversifying them to compensate performance or dilution. This is a silly idea.

I see the stock market the same way. Diversifying can actually diminish returns when the buying of investment is just for the heck of owning different businesses across multiple sectors. There is no concern over the quality of an investment,  and the price is not necessarily a factor.

When recessions are set in motion, no matter how diverse your portfolio is, losses are imminent. Still, great investments will sustain themselves, and opportunities will open.

What should you do? It would be irrational to own all available public companies rather than a few great ones. If you have the time to learn how to value a stock then search for the few great companies. Otherwise, contact us, and we will do it for you.

Written by:
Alex Lopez
Posted on:
July 25, 2017