Diversify them across different baskets.

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Introduction

Imagine this, you worked hard all your life and was able to save some money and you put all your savings in one financial institution and unfortunately that institution collapsed. The institution did not have depositors’ insurance and furthermore the institution was in a bankrupt state and could not pay you anything and as a result you lost all your savings.

You can have alleviated or reduced the losses if you did not put all your resources in one basket.  To counteract the example above, you should diversify and spread out your savings among multiple unrelated financial institutions so if one failed, at least you will have resources in other financial institutions.

Do not put all your eggs in one basket

Do not put all your eggs in one basket. It is risky because as demonstrated above, if the basket falls, and all the eggs broke, you will have to start all over.

For those of you that have a job, don’t depend solely on that job or that area you work in. Learn other aspects of your company or start a business on the side. Now don’t do the same business as your employer as you should not be competing against your employer. Furthermore, if there are issues in the industry, at least you will have something else to rely on,

Likewise, for those of you that are entrepreneurs, consider diversifying your business or have more than one business. Even if you have one business, offer multiple products or services so if some of the products or services are slowing getting sold, you can have an opportunity to make sales on other products or services.

For those of you who plan to invest, diversify your portfolio. Invest in different types of assets, different industries and even different countries.

Even from a country level, we should not put all our focus on one industry such as Turks and Caicos and many other Caribbean islands where our focus is entirely tourism.

Why should you diversify?

Diversification may cost you more because you will have to pay fees to the different institutions when you can pay one fee at one institution but hopefully you have concluded and agreed that it is best not to put all your eggs in one basket. It reduces the risk of you losing everything. It is also an opportunity to learn different industries and in so doing it can lead to growth. The impact of COVID taught us why we should diversify.

Conclusion

While diversification is good, you need to know what you are doing to maximize your returns. If you lack the knowledge, you may end up putting all your eggs in one basket when you think you are putting them in different baskets. You may ask what I mean by that. Well, you may put your resources in different institutions, but those different institutions may be owned by one parent and that one parent may collapse resulting in all the baskets being impacted.

Mind you, there are some people who are doing well without diversification but if you want to be in a safety mode, you should consider diversification even though there is no guarantee your losses will not be alleviated.