People who invested in Enron would understand this principle very well, but it is interesting that some investors and entrepreneurs disagree: Andrew Carnegie, Thomas Edison and Elon Musk have at one time said that to have all your eggs in one basket is not necessarily a bad thing, as long as the basket is watched and taken care of. By this they probably mean that an unfocused approach can be detrimental to wealth creation, because your intentions are split, your actions are weakened by that, and your end result is less impactful.
But these men and other men and women investors will tell you that when it comes to money, it’s never a good idea just to back one horse in the race. That’s called speculation and gambling, and it’s a surefire way to lose your money.
No, a much more considered approach is what’s called for (and it does not necessarily have to all be conservative).
Let’s talk brass tacks by breaking this conversation down into simple steps. Say you had R100 to invest (in reality it would probably be a lot more, but for illustrative purposes let’s keep it simple). You could take all R100 and invest it with Old Mutual. But even though the investment will not yield as much, it’s probably wiser to invest R20 of it with Old Mutual, R20 with Liberty, R20 with Sanlam, R20 on blue-chip stocks, R10 in a bank (or several, with a fixed interest rate marginally higher than inflation), and only R10 on a risky speculative deal (your cousin’s new Internet start-up venture, which promises gold and other riches).
If any of the investments fail, you still have a cushion left, and at least you didn’t lose all your money. What are the chances of Old Mutual failing when it has the backing of Nedbank, or Liberty folding when it has the backing of Standard Bank? Well, you might remember a bank called Saambou.
Bottom line: make sure you diversify your savings and wealth-building portfolio. It is one of the basic tenets of growing your money.