A lot has changed in our world in such a short time. Marketers are not as popular repeating the mantra to invest and diversify. But is there value in the statement?
It was/is typically applied to the stock market. If you keep all your investments in the banking sector, a central bank policy could wipe you out in a jiffy. If you keep all your money in aviation, COVID could wipe you out, etc. We are encouraged to spread the money around different sectors and investment vehicles.
Diversifying could also have a negative impact. You invest in 5 companies, 3 are slow, 2 are fast. If you had put all your money in the two fast companies, you would get higher returns, but to be safe, you diversified.
Diversifying helps you to assess your risk and take appropriate measures to “win some, lose some,” but it moderates great impact.
Image by ❤ Monika 💚 💚 Schröder ❤ from Pixabay