Put all your eggs in one basket definition and meaning

The importance of diversification: why you shouldn't put all your eggs in one basket

Whilst ‘don’t put all your eggs in one basket’ is a well-used adage, it is still relevant today và means, don’t have all your money in one place as you could thua kém it all in one go.by Sally Hoolin, Investment Writer


Whilst ‘don’t put all your eggs in one basket’ is a well-used adage, it is still relevant today & means, don’t have all your money in one place as you could thua thảm it all in one go.by Sally Hoolin, Investment Writer


You may have sầu heard the saying ‘don’t put all your eggs in one basket’ but you may not know that – here’s a fact to impress your friends and excel at pub quizzes - it’s attributed to lớn Miguel de Cervantes who wrote Don Quixote in the early 1600s. It’s widely thought of as the world’s first modern novel.

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Whilst ‘don’t put all your eggs in one basket’ is a well-used adage, it is still relevant today and means, don’t have all your money in one place as you could thất bại it all in one go.

Putting eggs in different baskets

Fear of losing money is one of the reasons that people may be wary of investing, but putting your money into lớn different investments (your imaginary eggs going inkhổng lồ a series of baskets) can help reduce some of the risk.

In technical terms, this is called diversification. It just means spreading your money inlớn different investments, such as equities, bonds, cash, and property.

Why should I split my money across multiple baskets?

Let’s say you choose khổng lồ have some of your money in a cash savings trương mục so that it is easily accessible. You’re also on the property ladder, so you have sầu money invested there, và you have superannuation invested in a mixture of shares, bonds, property và cash.

This is an example of investing in different asset classes & it is important to lớn do, as not all asset classes are affected in the same ways by different economic events. If you don’t want lớn vày the diversification yourself, you could buy inkhổng lồ a fund that does it for you.

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When one investment basket (asphối class) doesn’t perform so well in the market, another may outperkhung, which can provide some protection against major losses lớn your money and investments.

You can also diversify your investment within an asmix class itself. For example, if choosing khổng lồ invest in equities, you could choose both large và small companies, those in different sectors and those in different geographical locations. You could also take a similar approach if investing in bonds, including the option of choosing khổng lồ invest in corporate or government bonds.

Returns of different investment "baskets" over the past đôi mươi years

Investment returns vary significantly between different investment ‘baskets’, or asmix classes, year-to-year. The chart below clearly demonstrates this by showing the relative sầu performance of different asset classes over the past đôi mươi years. It emphasises the importance of spreading your investments across different asset classes to protect your money against loss while trying to lớn achieve your financial goals.

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Finding the right balance: don’t over vày it

Finally, make sure that you don’t over vị it. Putting your money into lots of different investment baskets can only reduce risk up lớn a point và not remove sầu it entirely. All investment has some risk. Also, holding too many different investments doesn’t allow any of them to have much of an impact, so work with your financial adviser to lớn choose what suits your situation best.

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Whatever your approach to not ‘putting your eggs in one basket’ is, the key takeaway is that diversification can help manage your investment risk. And should you want khổng lồ impress your friends, tell them the basics of diversification along with the origins of the saying.


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