It means don't risk everything all at once. If you had a certain number of "eggs", it would be safest to put those eggs in different "baskets" and not "put them all in one basket". To "put all your eggs in one basket" would be to risk losing all of your "eggs" in case you drop that one "basket". |
Even if you are new to investing, this old adage explain you the most fundamental principles of sound investing. If that makes sense, you've got a great start on understanding asset allocation and diversification. Studies have shown that proper asset allocation is more important to long-term returns than specific investment choices or market timing.Asset allocation means diversifying your money among different types of investment categories, such as stocks, bonds and cash. The goal is to help reduce risk and enhance returns. The process of determining which mix of assets to hold in your portfolio is a very personal one. The asset allocation that works best for you at any given point in your life will depend largely on your time horizon and your ability to tolerate risk. |
Time Horizon Your time horizon is the expected number of months, years, or decades you will be investing to achieve a particular financial goal. An investor with a longer time horizon may feel more comfortable taking on a riskier, or more volatile, investment because he or she can wait out slow economic cycles and the inevitable ups and downs of our markets. By contrast, an investor saving up for a teenager's college education would likely take on less risk because he or she has a shorter time horizon. |
Risk Tolerance Risk tolerance is your ability and willingness to lose some or all of your original investment in exchange for greater potential returns. An aggressive investor, or one with a high-risk tolerance, is more likely to risk losing money in order to get better results. A conservative investor, or one with a low-risk tolerance, tends to favour investments that will preserve his or her original investment. |
Check your Risk Tolerance | Understand the Asset Pyramid | Allocate with Investment Clock |