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Diversify to Protect Your Investment

Diversify to Protect Your Investment

For the past 2 years, I’ve been investing in various companies and opportunities. If there is one most valuable lesson I’ve learned, that is to DIVERSIFY.

There’s a saying in investment community that goes “Don’t put all your eggs in one basket”. This is literally true to protect your investment. No matter how sweet the deal is during the pitch, along the way we cannot control the outcome. Shit happens sometimes. This is true to every business out there, some will struggle along the way for lots of reasons.

As investor, we do not control the business. We only put our money and hope that the business do good over time and wait for the profit.

Investing comes with a risk. But that’s the beauty of it. Success comes from taking that risk. Staying on your comfort zone will not give you much benefit in the long run. When we invest, it’s mostly base on trust. Trust in the people who runs the business and trust on the business that they are doing. We can only check their past performances, background and calculate our risk base from those factors. However, the future is still unknown. It is up for us to take those risk with the motivation of a possible reward on our investment.

The only way you can protect your investment is thru diversification. Protect yourself from the unknown future by anticipating it. If it happens, at least you are prepared. If not, then good for you 🙂

In more than 2 years, my investment portfolio is diversified in various asset classes and more than 20 companies. Half of my portfolio are in agriculture companies. Some investments are short term like 6 months, some lasts a lifetime especially if I invested in shares of the company. Return varies from 15% up to 100% annually. But these are all risky investments and not adviseable for the faint hearted. Though the business model seems so easy to understand, there can be a hundred ways it can go wrong as well along the way. I am a risk taker and I want to take that risk. I just make sure that I always have Plan B. Invest only your excess money and have your emergency fund intact.

In my retirement monitoring sheet, I only put a 15% goal return on all my investment. As I have mentioned, some of my investment returns are higher than that. But by keeping my goal less, I can afford to fail on some of my venture without disrupting my retirement goal projection. I am too diversified that if anything happens on 10% to 20% of my portfolio, I am still on track to achieve the goal of having 15% growth on my investment portfolio. By keeping my projection low, I have a room for failed venture if it happens.

Figure 1: On this sample table, you can compute at your breakevent point where you can still fail and still hit your target.

diversification-example-table1

Figure 2: On this example table, it shows that even if 3 ventures failed, you are still on track to get a 15% return

diversification-investment-table2

Business and entrepreneurship is not an easy task. I admire those who have the courage to quit their job and start their own company. The future is uncertain and a lot of things can go wrong. It’s part of the deal when I invest. When everything goes bad and didn’t go the way we wanted it to be, don’t burn bridges with them. Always maintain a good relationship. Business can fail for a lots of reason. And for every failure, you’ll gain experience and learning. Keep going and apply that to your next venture until you become an expert and you hit success.

Success can be achieved thru a series of failures. Always have the courage to take the risk. Invest and make your money grow instead of putting it in a bank with less than 1% return in a year.

Make your money work for you rather than you working for money. That’s one way you can retire and enjoy the best things in life without worrying your expenses. Start early and retire young 🙂

About Richard Macalintal

Hi my name is Richard. I am a Registered Financial Services Consultant in Singapore. If you have any queries or you need help on your insurance policies and investment linked products, feel free to message me :-) We can have a cup of coffee while I do financial review and give advice with regards to your finances :-) Contact me thru email rlmacalintal(at)yahoo.com or SMS me +65 82235186. Disclosure: I am a Financial Consultant of AIA. The statements or opinions expressed on this site are my own and do not necessarily represent those of AIA.

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