To put all good eggs in one basket, and then watch the basket – Andrew Carnegie
Well, which advice you choose to follow? Sounds confusing right? 🙂 In my opinion, these quotes are about strategies in business, and a strategy must suitable with a size of capital.
Let’s start with PUTTING ALL eggs in one basket
This advice is really useful with whom starts with modest amount. It’s mean we afford only 2 or 3 eggs and we should watch them carefully. In trading stock, with a little money, I’ve learned that I have better control on risks with very focus portfolio more than the one is diversified but out of control. Kindly take a look at my notes below, for example with the same amount of 2000$ while Portfolio 1 would make me take lots of efforts to manage it, the Portfolio 2 would reduce workload and easier to take control on it.
And “DO NOT PUT ALL eggs in one basket” advice?
At the first time I take this advice seriously as Portfolio 1 above to balance risk and protect my capital. I’ve make efforts to do research for different stocks in different sectors, stock with high transaction volume, high dividend etc.. but it was not really help. Why? Because stock price up and down follow the market trend. If the trend is not friendly I still lose money cause I put all eggs in one basket – the stock market basket.
Then I’ve learned that I need to diversify my portfolio by choosing different investments with various rates of return. So my baskets now includes domestic currency fixed term saving account with interest rate of 6.5%, US dollar saving account with interest rate of 4.5%, corporate bond fund with 8% in return, buy insurance with accumulation about 3-4%, and stocks with interest rate upon on my trading skills. :))
In summary, my notes are:
- Pick only 2-3 stocks per time to buy and watch it carefully
- Diversify portfolio into different investments to protect my capital