Saturday, November 13, 2010

Don't put all your eggs in one basket!

One of the time-tested investment rules is "Diversify! Diversify! Diversify!"

Never put all your investment eggs in just one basket.
Different types of investments are exposed to different levels of risk and by diversifying, the losses in some investments can be offset by other investment gains.  (Refer to article here)

The whole idea is to reduce the overall risk by investing in a broad range of economic sectors. Studies show that proper allocation accounts for more than 90% of the total return.

How you could spread the risk...
  • Different asset classes
  • Different regions in the world
  • Different industries
  • Different companies
  • Different currencies
  • Different maturity dates, etc.