All your investment eggs in one basket

It’s okay to keep all your investment eggs in one basket or even a jar.

“Keep all your eggs in one basket, but watch that basket closely.” -Warren Buffet

Below are some of the most common things I have heard while learning to invest.

Do not keep all your eggs in one basket. Diversify your investment. Diversification is for people who do not know what they are doing.

It is nearly impossible to make a decision with all that back and forth. It’s like a financial tug of war. I got tired of the tennis match. No more ping-ponging. You have to pick a path. You finally have to ask yourself, which one is it?

Basically, it’s okay to keep all your eggs in one basket. As long as you watch over it.

A simple method to use is a split one. If you have $1,000 to invest and cannot decide among four investments, then put 25% into each of them.

The one that tanks over a three to five-year period you can just jump ship or hedge your bets by only limiting what you invest. Just decrease your exposure to risk by selling the entire investment or reducing your investment amount to say 12.5 percent.

For example, you decide to invest in Apple. You like to products. You also like 10 other tech stocks. However, instead of diversifying you place your funds into one stock: Apple.

Wait. Let’s back the truck up.

Please note, that first you must decide on your risk tolerance. This is based on what you can afford to reasonably lose because as they say if you can’t afford to lose it, then you can’t afford to have it.

You may decide you can only afford to lose $100. This is your risk level. Anything past this means stop. Do not pass go. Do not collect $200. Or in this case, do not invest $200.

You may have inherited $5,000. Nice windfall. You decide that you are willing to invest $1,500.

Now let’s get back to Apple.

You place all your bets on one stock. That’s it. Now all you do is watch over it. You may set a time horizon of say three years to see an increase of five percent or more.

If this is not the case, then you can sell some or all of your investment and move on.

Either cut your losses or be ready to possibly lose more.

I’m the kind of person who’s comfortable carrying low-interest, tax-deductible debt for 10-20 years. It doesn’t phase me. I sleep just fine.

No matter what: you made a decision. You pulled the trigger. Life like investments cannot be all theory and no practice. People tend to aim, aim, aim….

I think you get the point.

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