Diversification is protection against ignorance. It makes little sense if you know what you are doing. -Warren Buffett
Gentrifanatics!
Thanks for coming back!
Since the last time we connected I got the chance to talk with some of you! I truly appreciate you reading and implementing wealth building strategies in your lives!
I want to put together the most useful content possible. Keep the feedback coming!
Ok let’s get to it.
Most of you have heard that you need to diversify your investments. If you haven’t, in a nutshell it means that when making money dont put all your eggs in one basket.
That’s how I used to try to build wealth and I was wrong.
I tried countless different investing strategies hoping one of them would work out. What ended up happening is that I wasted my time doing things that I wasn’t really interested in just because I thought they would make me successful.
This leads to frustration, burn out, and little to no return on your investment of time and money.
What I’ve learned is that to build something great, you need to focus your efforts.
In this post you’ll hear about when to concentrate your efforts and when to diversify.
Diversification
Basically diversification means that you are spreading your efforts.
This is a strategy used to preserve what you already have. It’s used to alleviate risk.
For example, if you have a million dollars you might not want to put all of it into one investment. If that one investment goes bad you’ll lose your money.
If you take that million and invest in several different assets then there is a lower chance of you losing all of your money.
Say you’re invested in ten assets.
If you lose all of your money in one asset you still have nine others. Using the million dollars example you’d only be out 100k but you’d still have 900k working for you.
This is why diversification is for preserving money, not necessarily building it.
Concentrating
You read how diversification saves you from losing all of your money.
What if you have little to no money to begin with?
Do you really need to diversify a $100 investment?
I’d say no.
With $100 your goal should be to grow it into a million, not make sure you don’t lose the hundred.
This is where concentration comes in.
Concentrating your efforts means putting all of your eggs into a carefully selected basket and then watching that basket closely.
I’m not saying take that $100 and put it all on black at the casino! You have no control over that basket!
Use that $100 to save for a down payment on an investment property.
Use it to start an income generating business.
Or if you already have a business use it to buy something that will bring in more revenue or make the business more efficient.
In previous posts we talked about “Why Saving Your Money Will Never Make You Rich”.
It’s true. It won’t.
Wrapping Up
Avoiding risk is based on fear.
Fear is negative.
Dont make decisions in your life based on negative emotions.
Make well informed decisions but dont be scared of money. Learn how to make it work for you.
Concentrating your efforts could even mean taking that hundred and buying some books.
Or even hiring a good consultant to walk you through your specific circumstances.
I’m always available to help! Just HMU, I’ll be around!
