HomeAdvisor ServicesWhy you shouldn’t put all your eggs in one basket and all baskets on the same plane?
Why you shouldn’t put all your eggs in one basket and all baskets on the same plane?
January 8, 2021
Imagine that you have invested all your money in the shares of one single enterprise (or, for example, in some kind of cryptocurrency), hoping that the enterprise will continue to do well in the future and you will make a profit.
However, successes and failures are unpredictable: if the company loses, you will lose too. In other words, such an investment model is very risky.
The solution in this case is diversification- investments in different asset classes, in different enterprises, different areas, different regions, etc.
Since it takes knowledge and time to invest on your own, the best option would be to choose one of those solutions in which assets are already grouped according to various parameters.
One of these solutions, which is suitable even for absolute beginners in the world of investment, is investment funds. They are made up of portfolios; each portfolio has different stocks, bonds and other asset classes operated by experienced managers.
Contributions must be regular
This point is also important from the point of view of risk diversification. If you make a contribution once a year, it may happen that you buy shares at the very moment when they are at their highest point in value, and therefore the opportunity to make a profit will be significantly reduced.
In turn, buying shares at a lower price will increase your profit potential. But since it is not possible to guess the most favorable moment of the purchase, the solution in this case would be regular monthly installments.
That is, you will buy funds at both lower and higher prices, but they will level out on an annual basis, you can do this with the help of Portfolio Advisor Services.
You need to stick to the plan and stay calm.
The global economic crisis was a good catalyst for this principle. Namely- prices for many securities have experienced a decline, sometimes dramatic.
As a result, some inexperienced investors got scared, and in a hurry they sold their shares, fearing to lose even more. If they had waited, then, perhaps, now they have already returned the lost with interest.
There is no need to rush to change your investment plan if you see that some other plan is doing well right now. Most likely, these are short-term fluctuations, which will look different after a few months.
Only if you notice that your plan has not been bringing any profit for a long time- several years- it is worth considering the possibility of changing it.
In a crisis situation, investors need to try to stay calm and not worry about falling prices- the economy is cyclical and prices cannot only rise or fall forever.
In fact, many seasoned investors are using the crisis and falling prices to acquire additional shares, because when the growth begins again, they will have a higher potential for profit. With the help of best stock tips advisory company in India, you can even get higher profits.