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Don’t Put all Your Eggs in one Basket

“Just like the eggs – if you drop the basket you can break many if not all of them”

Basket of Eggs Basket of Eggs

Special Easter Edition !


Just like eggs you should put all your stocks in one basket.

I have never met the Easter Bunny but I can almost certainly tell you that the Easter Bunny would never put all those boys and girls eggs at risk by placing them all in one basket, and neither should you !

There is a lot to be learned from the old adages that we really don’t pay much attention to and take for granted. There is a reason why they are repeated so much in our language and that is because they serve us well as reminders of life lessons.

Just like the eggs – if you drop the basket you can break many if not all of them. And with stocks , while they do not “break” they can break your accounts. I like to spread my savings out into many different accounts – and in differing institutions. I will grant you that it can be difficult keeping track of so many accounts but for me it is well worth it. It gives me peace of mind knowing that my little eggs have their very own safe and well lined basket to reside in.

Of course how many you have is strictly up to you and I suppose it would depend on how much money or little”eggs” to protect.

Banking – It is a good idea to have at least two Checking accounts and two Savings accounts at two different banking institutions ( I would also recommend that one of them be a credit Union). The same for Brokerage Accounts. I like to have at least two Brokerage accounts with two different Brokerages.

Now it can be a little difficult when keeping track of them but if you are like me and you want to help ensure the safety of your hard earned money it is well worth it.

In summary – don’t put all your “eggs” in one basket.

  • Use Diversification – That is buy stocks in differing sectors, IE Communications, Oil & Gas, Financial, Consumer, Tech, ………………..
  • Limit Investments to a certain percentage of the total Portfolio value – that is is you have 25 stocks and $100,000 in value you would limit the dollar amount of each stock to no more than $4,000 each or 4% of the total
  • Use Risk Mitigation by have more stocks in a portfolio – example¬† – $100,000 with 10 stocks you have $10,000 at risk with each stock but if you have 25 stocks you are only risking $4,000 with each investment.

Investing is Fun and it can be very rewarding but you should always take precautions to protect yourself from losses. Protecting yourself takes very little effort and may help you sleep better at night.

 

Thoughts or comments ? We would love for you to share them with us.

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