The Importance of Diversification – Ecclesiastes 11:2

I have a question for you:

Are your investments appropriately diversified?

Before you answer this question too quickly, let me ask the question in a more extended version:

Are your investments appropriately diversified – both within and outside of the stock market?

This is a very important addition to the question. Let me explain.

When the entire stock market goes up, it tends to drag the stocks of lower performing companies up with it. However, when the entire stock market goes down, it tends to drag down the stock price of companies that continue to perform very well. This is why it is vitally important to diversify your investments – both within and outside of the stock market.

Many people only have investments within their company retirement plan where they are offered various stock market investment options. As a result, their investments are subject to the greater market’s performance.

Ecclesiastes 11:2 provides this great wisdom: Invest in seven ventures, yes, in eight;you do not know what disaster may come upon the land.

This is why I have invested in both market-based investments as well as non-market-based opportunities.

Here are some great non-market-based investments to consider:

  1. Rental Real Estate – Commercial and Residential
  2. Land – They’re not making any more of it – except in a few volcanic islands
  3. Precious Metals – Gold, Silver, Platinum, etc.
  4. Antiques
  5. Talents – Write a book, Record an album, etc.
  6. Business – Start up a small business

I’ve found Ecclesiastes 11:2 to be very helpful in my money journey. As I’ve invested in a variety of assets, some of them have encountered struggles. By having a widely diversified set of investments, my other assets have helped carry the load until a struggling investment improved.

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