The concept of spreading around your savings and diversifying, comes from an old adage that most of us probably grew up hearing our parents say: “Don’t put all of your eggs in one basket.”
Basically, it’s a simple financial strategy: divide up your savings into at least three very different types of investments:
- Extremely Conservative (and easily accessible in an emergency) could be a TFSA or savings account at your favourite financial institution (online or brick and mortar);
- Mid-Range Risk could be a RRSP or mutual fund account (self-directed or handled by the institution you invest with – terrific for planning your retirement);
- Higher Risk could be the stock market, DRIP investments (buy one share of stock, then have all dividends from that stock reinvested with the company that issues the stock, thereby ensuring a continuous small stream of income down the road) or something else that might be a bit less of a “sure thing”.
In this volatile and highly-unpredictable economy that we’re enduring (and will most-probably continue to endure for several more years), it is essential that you have a mix of investments and cash reserves you can count on to carry you through the bad times, so you can avoid debt problems or bankruptcies in Canada.
By diversifying, and juggling multiple financial “egg baskets” you will discover over time that even when one type of investment isn’t performing as well as you would have hoped, another might be going gangbusters and really helping increase your overall portfolio.
The bottom line is this: Spend less and save more.
Canadians used to be huge savers (we had more savings accounts and funds in safe havens like Canada Savings Bonds than any other types of investments), and we need to get back to that frugal approach in order for us all to weather the dips in the economy that we know will face us in the future.
“A saver not a spender be” is another old adage that hammers home that philosophy.
Would you like to know more about protecting your assets during a bankruptcy or Consumer Proposal? Contact us for a free, no-obligation debt assessment.