Diversification: Why shouldn’t I put all my eggs in one basket?

We're diving into the world of diversification today, and trust me, it's all about not putting all your eggs in one basket. Diversification: Why shouldn’t I put all my eggs in one basket? We’ve got a listener asking the million-dollar question: what does it even mean to diversify? Well, I’m here to break it down in plain English. You see, spreading your investments across different assets is like having a safety net; it keeps you from taking a nosedive if one stock decides to tank. So, whether you're juggling stocks, bonds, or even cash, we’re gonna chat about how mixing it up can really pay off. Stick around, because we're also throwing in some wisdom from the good ol' Bible—Ecclesiastes has something to say about not putting all your eggs in one basket, too!

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Ever thought about why you shouldn't dump all your cash into one investment? Well, let me tell you, it's a recipe for disaster! We dive into the whole concept of diversification, which is just a fancy way of saying, 'Don’t put all your eggs in one basket.' You might have heard this saying before, and it's got some serious wisdom behind it. Our buddy Ralph shares real-life stories about investors who lost big because they went all in on one stock. Spoiler alert: it didn’t end well. The key takeaway? Spread your investments around like peanut butter on toast—smooth and even. Whether you’re into stocks, bonds, or that sweet cash stash, mixing it up can keep your financial life balanced and protect your hard-earned dough from the inevitable market storms. We even toss in some wise words from Warren Buffett, who reminds us that diversification is basically a safety net for your finances. It’s all about playing it smart and not being left high and dry when the market takes a nosedive.

Takeaways:

• Diversification is key; don't put all your eggs in one basket, folks!
• Investing in multiple assets protects you from market downturns and financial disasters.
• Balance is everything in investing; find that sweet spot and keep it steady.
• Warren Buffett says diversification is like a safety net for everyday investors like us!
• Mix it up with stocks, bonds, and cash to spread out that risk, baby!
• Even the Bible says invest in multiple ventures—it's wisdom, not just a suggestion!

Links referenced in this episode:

• financiallyconfidentchristian.com
• financiallyconfidentchristian.com/support

Companies mentioned in this episode:

• Walmart
• Amazon
• Warren Buffett

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Episode Transcript

(00:00):
Have you ever heard thatsaying, don't put all your eggs in
one basket. It's kind of aninteresting way to think about it.
We're going to talk about abig word today and it's called diversification.
And I got this great questionfrom a listener. They said, Ralph,
I keep hearing that I shoulddiversify, but I'm not even sure
what that really means. How doI know if I'm actually diversified?

(00:20):
And I thought that's a greatway to look at this because so many
people hear a big word likediversification, a fancy word, and
they wonder, what is Ralphtalking about today? I threw some
big words out as we talkedabout this investment series, but
it's really a fancy word for avery simple truth. And that's don't
put all your eggs in onebasket. Because the truth is if you

(00:40):
do that, if you put all thoseeggs in one basket, you make one
wrong move. Let's just say youown some stock and let's say you
decide, I'm just going to buyone single stock. Well, if that stock
takes a hit in value, guesswhat, you get hurt. So diversification
is really nothing more thanspreading out your money over multiple
investments because in the endit helps protect you. So on today's

(01:02):
show, let's protect thoseinvestment eggs. This is Financially
Confident Christian, yourdaily dose of gospel, grounded insight
and faith driven tips to helpyou break the cycle of financial
shame with confidence. Hellothere. Welcome to the show. I just
want to thank you for joiningme. I truly appreciate the confidence

(01:22):
you put in me every day. Andthe truth is, in my 30 year career,
I've seen people lose big. I'mtalking about big losses when they
had money just in a singlecompany. All of us have heard about
those sure things at work.Think about the water cooler talk
we had with that friend fromwork or that colleague and they said,
oh, you absolutely have toinvest in this. This is a sure thing.

(01:44):
But the truth is you got to becareful of those. And that's why
I want to talk aboutdiversification today. Because many
times in my 30 year careerI've helped people weather the storms.
And listen, if you're in themarket, there are going to be storms
in the market. Let me tell youabout a story. I had a client one
time, this client was a verygood person as far as understanding
investments. But the problemwas they worked for a company and

(02:05):
they had all their investmentsin that company and I understood
that they were bought into it.They work there. They really were
a believer in that company.But the problem is the economy took
a hit, the company struggled.This person ended up losing his job.
And the problem is when helost his job, he not just lost his
current income, but he lostmost of his retirement investments,

(02:25):
all because he was all in thatone thing. He had all his eggs in
one basket fordiversification. Because the truth
is, diversification would haveprevented this. And I love what Warren
Buffett says. I've used WarrenBuffett on this show a couple times
now. And he had this greatquote. And I think we just really
need to take a minute andthink about this. What Warren said
was this. He said,diversification is protection against

(02:46):
ignorance. It's how everydayinvestors avoid disaster. And I thought
about that for a second. Thatis a great quote from Warren. Now,
this might come off as being alittle brash, but basically what
he's saying is don't beignorant. Diversify. Don't leave
all those eggs in one basket.And now you're probably thinking,
okay, Ralph, I get it. I'mgoing to the grocery store, I put

(03:08):
my eggs in a nice container sothey don't get broken. I'm going
to do the same thing with myinvestments. But now you're saying,
Ralph, how do I make thathappen? How do I actually put that
into practice? And the truthis, it's really all about balance.
This whole 30 day investmentseries, if you really want to boil
it down, is all about balance.And I think about one of the founding
fathers of America. His namewas Ben Franklin. We've heard a lot

(03:30):
of things about Ben Franklin.But one of the things that Ben Franklin
said so many times was do allthings in moderation. And that's
really what we're talkingabout here. Don't go to any extreme
with one particularinvestment. Because the truth is,
and this is whatdiversification really, what it really
means when one investmentstruggles, those other things in
the basket help to balancethat. It's sort of like your rescue.

(03:53):
Now, I'm not just talkingabout different stocks. A lot of
people say, okay, Ralph, youcould just put different stocks,
buy different stocks. That'snot at all what I'm talking about,
actually. I'm talking aboutgoing a little deeper and I'm talking
about mixing those thingsacross assets. Now that's another
big accounting word. A lot ofpeople think, what does assets mean?
What I mean by that isdifferent types of investments. For
example, maybe you invest instocks, you can buy different stocks.

(04:15):
Maybe you invest in bonds,they're not in the stock market.
Or maybe you do cash. Now,when I Use the word cash. I mean,
things like certificates ofdeposit or maybe money market accounts
with the bank. But not havingall those things under just one thing.
Because here's the truth. Eachof these different asset classes
behave differently, and theybehave differently intentionally.

(04:37):
So. For example, let's say thestock market is having a downturn.
But what we've seentraditionally is the bond market
will come up. Maybe the bondmarket is not doing well. That's
when the stock market mightrally. Or Maybe that's when CDs or
money market accounts arereally doing well. Because the truth
is, even in the stock market,this is the thing a lot of people
don't understand. Even in thestock market, we need to diversify

(04:59):
there. Maybe we want to investin U.S. assets, maybe we want to
buy U.S. companies. Maybe wewant to look internationally. There's
some great internationalinvestments. Again, you have to understand
what you're getting into. Wealso have to diversify as it relates
to small and large companies.A lot of people think, well, I'm
going to buy that Walmartstock, I'm going to buy that Amazon
stock or whatever those bigstocks are. But the truth is, there

(05:21):
are some great diversificationstrategies in middle and smaller
stocks. One of the things Italked about on the show a couple
days ago was using moneymarket funds or ETFs, or any of those
type of investments. Becausethe truth is, here's the great thing
about those type of things.They offer diversification in a single
purchase. You're not justbuying one stock. You've got a fund

(05:41):
manager. And I want toencourage you to go check out all
of our episodes. You can doall of those at Financially Confident
Christian. But in the last fewdays, I talked about that. But the
big takeaway today is you'vegot to do a reality check. A lot
of people say, Ralph, okay,great, I'm going to diversify. I'm
going to have no risk. Here'sa sad truth. Unfortunately, no matter
what you do, there's alwaysgoing to be some risk. You can't

(06:03):
eliminate all the risk. But bydiversifying, by not putting all
those eggs in one basket, youcan make it more stable. Now, one
of the things I like to dowith the show is really dive down
into Scripture. And I found agreat book or a great verse from
the book of Ecclesiastes. Thisone comes from ecclesiastes, chap.
Chapter 11, verse 2. And I'veused this the last few days as well.

(06:23):
And this is what it says. Itsays, invest in seven ventures. Yes.
In eight you don't know whatdisaster may come upon the land.
And I thought, okay, Ralph,how do you apply that to diversification?
And I thought about, I said,you know what this is really doing?
Scripture's teaching usdiversification as wisdom. What is
the word saying? It saysinvest in seven ventures. Yes, and

(06:44):
eight. It doesn't say to goinvest in one venture. Just like
my client learned. He was sosold into one thing. And I get it,
he worked there. That was hislife. That's what he saw. But even
the Bible's telling us, don'tput all your eggs in one basket.
Well, how about we praytogether Now, Father, we just thank
you for this gift ofdiversification. And Lord, sometimes

(07:04):
we get greedy and we want togo get chasing after those sure things,
Lord, but we thank you so muchfor the wisdom to spread that risk,
Lord, and the opportunity todo things that help us to not put
all our eggs in one basket.Lord, we just are so grateful for
the resources that you us on adaily basis. We don't deserve it,
Lord, we just thank you somuch. And Lord, we trust in your
provision and we remember wedon't trust in that stock market,

(07:26):
Lord, but we trust in you. Andwe ask this in complete confidence
in the name of Jesus. Amen. Soyour big goal for today, and it's
really quite simple, today Iwant you to find some extra egg baskets.
Yeah, it's really that easy. Iwant you to look at your investments,
do a deep dive and say, am Iholding just a few stocks? Listen,
I've counseled many people inmy 30 year career. They didn't even

(07:48):
realize what they wereinvested in. So get those statements
out, take a look at whatyou're investing in. If you've got
a broker, call your broker. Ifyou're doing a 4 to 1k at work, contact
your HR people and reallyunderstand what you're investing
in. Because if you add thatdiversification, you're going to
build that balance. So again,big recap for today. Don't put all

(08:09):
your eggs in one basket. Ifyou don't learn anything else I said
today, remember this, don'tput all your eggs in one basket.
Spread those assets acrossdifferent markets and, and different
asset classes like stocks,bonds, mutual funds, ETFs, certificates
of deposit, money markets, andagain this, there's no guarantee
to this. I don't want you toleave today showing. Well, Ralph
said if I'm diversified, I cannever lose money. I'm sorry, that's

(08:32):
not true. But these things dodo this. They lower the chance of
disaster. Because the Biblereminds us this wisdom is in preparation
and balance. See, there's thatword balance again. All right. One
of the things I would reallyencourage you to do, one of the things
I really am trying to do isI'm trying to grow this show. One
of the ways we can do that isI'm going to ask you to support the
show. You can go tofinanciallyconfidentchristian.com/support. When

(08:56):
you get there, you're going tosee this thing that says, buy me
a coffee. And I'm going totell you, if you listen to the show
for a while, I don't evendrink coffee. I do have a hot tea,
and I do that every day. Hottea. But basically, a buy me a coffee
is just a way to support theshow. You can buy 1, 2, 3, 4, whatever
you're looking to do. And youmight be saying, wait a second, Ralph,
what are you going to do withthat money? It's not to profit me.

(09:16):
It really isn't. I want to dothis so I can grow the show. I want
to market the show. I want togo advertise in more areas so we
can reach more people, we canspread this knowledge and try to
break that financial shamethat so many people are suffering
with today and help them findconfidence. So, again, if you would
support the show, I wouldgreatly appreciate it. You go to
financiallyconfidentchristian.com/support. Now,

(09:38):
tomorrow on the show, we'regoing to answer this question. Why
is it when we know what weshould do, we don't do it? Listen,
you might be thinking, Ralph,I can't wait till tomorrow because
I'm right in that team. Well,tomorrow I'm going to break it down
and we're going to talk abouthow to be more successful. Even when
we know what we should do, whydon't we do it? So make sure you
join me tomorrow and today I'mgoing to charge you with this. Go

(09:59):
be a financially confidentChristian. I have confidence in you.
Have confidence in yourself.You can do this. God is with you.
Stay financially savvy. Godbless you, and you have a great day
today.