How to Prevent Your Investments From Cracking

Don’t put all your eggs in one basket. It’s a maxim we have all heard since childhood. The basic premise is that if you must figuratively transport a number of eggs from one place to another, placing all of them in the same basket will expose you to a total loss should the basket fall en route.

We hear this admonition in the world of investing all the time as a short form for “diversify your investments so that a loss in one part of your portfolio won’t negatively affect your other investments.” But the question really isn’t whether to diversify, it’s: How many baskets do I need?

Let’s say all baskets and eggs are the same and that you have 100 eggs. Assume there is a 10% chance a basket will fall while being transported, and a 100% chance that all the eggs in that basket will break as a result.  Read More…

This article has 7 Comments

  1. Clark V.

    It's all about diversification. It's been like that since the dawn of time. Anyone who attempts to try to beat the market by going big exposes themselves to definite failure. Always research and spread your risk over the field.

  2. Jaheim Walden

    The worst is relying on neighbors advice on what is the hot picks of the moment. The very second you know what you should do it is already too late since the stock price already has taken into account any new growth and the next direction will usually be down. 🙁

  3. Terence

    This is way too complicated. Is there a quick solution in knowing what to pick. I can't figure out why people just don't give a list and be done with it.

  4. Ezequiel Shepard

    It's never an easy task to figure out what is the best for ones finances but because it is your money you really need to spend the time it takes to figure out what is best for you. Everyone's case is different because everyone has different risk levels and are at different stages in life (age wise, having children, etc).

  5. Andrew

    I remember a long time back reading a Wall Street Journal article about how monkeys beat the top money managers in picking stocks for the year.

    This says its all random and you should save your money and not flushing it on fund managers.

  6. Izaiah Petty

    It still helps to read a lot of investment books and practicing in online accounts before going about putting your hard earned money in the stock sector.

    This is from experience because i've lost a bundle from not realizing the importance to read perspectuses and just plain studying the charts.

  7. Amandeep P

    From my experience the time it takes to find descent mutual fund managers isn't worth the ROI you get. Especially when most of their MER% are way out of wack. Stay away from mutual funds. They are a relic of the past. Not much else to say.

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