Stick with what you know.
Develop multiple streams of income.
Don’t weaken yourself by dispersing your efforts.
Do not put all of your eggs in one basket.
Put all your eggs in one basket.
The conflicting advice has been coming at us on this since Adam and Eve bought the idea of eating that one fruit.
What to do is a difficult question. It really depends though on what we are specifically talking about. Advice for investing in stock markets or other markets for that matter is different from over all advice about how we should build wealth.
I am not going to talk about how to invest in stocks here. My crystal ball is in the shop getting its monthly cleaning. The bigger question is your overall financial strategy. Until recently this question was only one for big businessmen and the rich.
Do I put all my money in oil, or do I acquire other interests. One of our first true tycoons in the US, Andrew Carnegie, advised strongly that you should put all your eggs in one basket, study those eggs a great deal and watch them very closely. His eggs were steel. He did pretty well – becoming the richest man in the world by the turn of the 20th century.
But is his advice still good? Is it wise or sufficient to derive all your income from one source? And does it matter if you are a billionaire or just a typical American trying to create some financial independence?
Today’s financial gurus preach the gospel of multiple streams or sources of income. Robert Allen is one who has written books on this, even by the title, Multiple Streams of Income, but he is no alone.
If you look at all that has been written over the past century on this subject, or at least the bulk of it, you see several principles that seem to make sense. The chief principle is that to minimize risk and maximize your income generating capacity you are wisest to balance your competence against some diversification.
That is to say, you must spend sufficient time and energy on an income area, whether it be sale of a product, investment in a market, real estate, internet marketing, publishing, writing, or any of hundreds of areas where one can make money, in order to know the industry well enough to build your competence in it and to build your market. On the other hand any time you put all your eggs in one basket you increase your risk if that business or income source should fail.
Carnegie was right in that if you spread yourself too thin you cannot become enough of an expert in your field to do well. If you are not watching your basket of eggs closely enough you could lose them. Allen and others are right that in a business world that is ever changing it is too risky to put all your income generation capacity in a single source. For most people gradually developing multiple sources of income is the wisest method of building wealth.
The key here is the balance. The key is to become effective enough in a field, to learn it and develop sound practices and processes that promote your success in that field, and then to automate it as much as you can. Once that money making process is secure (well as secure as any can be) you can spend some time and energy on a new endeavor. The important thing is to avoid spreading yourself so thin that you do not do any of them well.
Do one thing at a time. Do it well. Automate it as much as you can. Then develop mastery in the next area. Do it well. Automate it as much as you can. Then proceed to the next area. This cannot be done over night. It is a gradual process. It takes patience, focus and discipline. But then, the acquisition of wealth always takes patience, focus and discipline.
Daniel R. Murphy
Daniel R. Murphy
Educating people for building wealth, adapting to a changing future and personal development.