NDSU Extension Service - Ramsey County

Accessibility


| Share

How Many Eggs in a Basket?

How Many Eggs in a Basket?

 

          The saying, “Don’t put all your eggs in one basket.” has been around for a long time.  It’s good advice for a variety of situations, including financial planning.   The term used by financial advisors is “diversification”.

          Diversification refers to the placement of a certain percentage of investment capital within different types of assets.  You might have 50% of your investments in stocks, 30% in bonds and 20% in cash.  When your portfolio is diversified, you do not own just one stock or bond or cash investment, but a mix of several or more of one or more asset types. 

          The percentage of your money you want to allocate to each investment type depends upon how far away you are from actually needing that money. The longer your time frame, the more years you have to weather the ups and downs of the stock market and the more you can put in stocks.  Another factor is how much risk you are comfortable with – sometimes called the “sleep at night” factor.  If a volatile stock market makes you nervous about your investments, you might want to allocate fewer assets to stocks.

          Other tips from financial experts include allocating more assets to retirement funds when young to allow your money time to grow.  As your goals and age change, you may choose to put more funds into income-producing or fixed-asset investments and less into growth.  Securities you select will be determined by your age, income, job security, marital status, general financial needs and the current economic conditions of the country. 

          Typically money market accounts and CD’s have the least risk associated with them; bonds, T-notes and bond funds have a moderate risk and stocks have the most risk.   By setting up a personal allocation of assets using a mixture of risks and opportunities, you will have a greater likelihood of achieving your financial goals. 

 

Creative Commons License
Feel free to use and share this content, but please do so under the conditions of our Creative Commons license and our Rules for Use. Thanks.