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A money tree, a candy store and some eggs in a basket.

Saturday, August 29, 2015

A friend just congratulated me on my purchases made earlier this week in the stock market.

He said:
"You were like a kid in a candy store."

I said:
"Nope, I was an adult in a candy store."

He asked:
"Got difference meh?"

I said:
"Yup, a kid would not have the money to buy like I did. A kid would probably have enough money to buy one type of candy but I bought a variety."

I hope my friend got the messages I was trying to share and didn't think that I was trying to show off.

1. Money doesn't grow on trees. For most of us, to have money for investments, we need to save money from our earned income and, later on, save the passive income generated by our investments.

2. Avoid concentration risk unless we are very sure about the investment choice. As most of us are "know nothing investors", it is a good idea not to put all our eggs in one basket. This is sensible not only in the stock market but in other forms of investments too.

"Putting all your money in a single investment to have the income it generates cover all your household expenses exposes you to concentration risks."
What would I do if I had $750,000 to invest with?
Related posts:
"As my blog becomes more popular, it disturbs me that people think that I am some investment guru. Of course, I am not. I might be a bigger retail investor than most of my readers but I think that is where the difference mostly ends."
2. Concentrate or diversify?
"You have, however, rightly pointed out one of the weaknesses of such a strategy, especially if our funds are limited."


apex property investment said...

The candy store owners must be jumping with joy with AK coming in and buying a variety of candies... I bet he dread kids coming in and welcome ALL the adults with money to shop. (:

AK71 said...

Hi Apex,

If I were a candy store owner, I would welcome all customers, big and small. Every dollar adds up. ;)

Kids with loving parents in tow could end up buying much more than adult shoppers, actually. Hmmm...

AK71 said...

I came back from a long working trip and catching up with all the investment news. I want to say thanks because you gave me the confidence to invest in Croesus. Should have been a bigger investment. Haha.

Welcome back and you might be interested in this blog from 2015.

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