Good morning! I hope your day is off to a nice start.
There was a commercial on the radio where a banker called for a man and his young son answered. The kid told the banker his dad had gone fishing. He bragged, “My dad is the world’s greatest fisherman. And neat, too!” The banker was intrigued. “Neat?” “Yep! Every time he comes home the fish are neatly wrapped in white paper just like they do at the fish store!”
I was never that creative when I went fishing. We’d get back to the dock, open the cooler, and take out the few fish we’d caught. If my wife commented about how small they were, I had a standard reply. “They must have shrunk in the ice.” Hey, it’s physics … I don’t make the rules.
Whether you call it creativity, forward thinking, or just plain lying, there’s something to be said for having a backup plan. Things won’t always go according to plan, so there’s nothing wrong with making sure there’s a seafood market on the way home. And make sure it’s open.
In my early twenties, a business owner introduced me to a word I’d never used before – diversify. In simple terms, it means not putting all your eggs in one basket. Of course, yesterday that was the name of the game as kids around the world ran around picking up brightly colored eggs. At least those are boiled. If you drop the whole basket, all they do is crack.
But when it comes to life and finances, it’s not always that simple. Find a stock that’s performing well and sink all your money into that one stock. As long as it keeps growing, you’ll make money. But what happens if the company goes under or the product suddenly becomes obsolete? Then you’re left holding a stack of worthless paper.
It works that way in the job market as well. You get an education, find a great job, and settle back into a life of relative comfort. Well, as comfortable as work can be. But having been on the receiving end of a few “restructuring initiatives” (that’s what they call it when they send you home), it’s a lot more comfortable having a job than not having one.
But life happens. And whether you’re talking about employment or the stock market or pretty much anything besides dating and marriage, it’s good to be invested in more than one thing just in case something falls through. In this day and age, you can pretty much count on it. And according to a guy named Murphy, it’ll always happen at the worst possible time.
Now, I’m not a real fan of Murphy, and to be honest, I’m not even sure he’s a real person. But Murphy’s Law is well-known to most of us: “Anything that can go wrong will go wrong, and at the worst possible moment.” It’s a little pessimistic for my taste, but reality says we need to be prepared for those times when things don’t go as planned.
If you’re an investor, it means spreading your money around a bit. Sure, focus on the one that is making you the most money today, but always be on the looking for something additional. In the job market, it means keeping your resume up to date and networking with others in your profession just in case.
And unless you’ve reached a point where you could retire today with no additional sources of income, diversification is even more critical. The days of company-funded retirement are long gone. Social Security appears to be relatively safe for now, but who knows what the future holds? And if you think your 401(k) is safe, we need to talk.
The closer you get to retirement age, the less time you’ll have to recover from an unexpected scenario that wipes out or drastically reduces your income. Success in the stock market is a long-term strategy. And retirement plans go bankrupt just like anything else. Could you withstand a shock this late in the game? Most of us can’t.
And if you’re younger, that’s both good and bad. You have more time to get ready for retirement, but you’re also that much more likely to be called into HR with unpleasant news at some point. That’s not a reflection on you, but on employment in general. Job security isn’t what it used to be, and that’s not likely to change in our favor.
Bad things happen when we least expect it. Having a backup plan can make the difference between survival and bankruptcy. What’s your plan? Could you implement it on a moment’s notice? Or would it take a little time?
Diversification is insurance against disaster. It doesn’t mean you’ll never feel the pain of income loss, but it can certainly minimize that pain. Do it right, and you can match or even exceed your current income. Then your biggest problem is where to spend it.
That’s all for now. Have an awesome day!
© 2021 Dave Glardon – All rights reserved