The Golden Rule . . . of Investing

Aug 14, 2019 | Marc Morais


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You’ve heard it all your life: Don’t put all your eggs in one basket!

What does this mean when it comes to investing?

  • Investing all your money primarily in one stock severely increases your risk without necessarily increasing your investment return (see: Nortel, BlackBerry etc.)
  • Investing all your money primarily in one market isn’t as risky as above but is certainly not recommended (see Canadian Stock Market (S&P/TSX) in 2018 (-11.64%), 2015 (-11.09%), 2011 (-11.07%))

A doctor who will be retiring within the next 2 years asked me:

“Marc, if I give you all my money, won’t I be putting all my eggs in one basket?”

What a great question!

The answer is: “NO”

We will actually be investing your money in 10 different baskets.

  1. Canadian Equity – Canadian Stocks
  2. U.S Large Cap Equity – U.S Stocks (large companies)
  3. U.S. Small-Mid Cap Equity – U.S. Stocks (small/med size companies)
  4. International Equity – Stocks outside of N. America (Primarily in Western Europe)
  5. Emerging Market Equity – Stocks in emerging market economies (Brazil, China, India etc.)
  6. Canadian Fixed Income – Lower risk Canadian government/corporate debt
  7. Global Fixed Income – Debt outside of Canada
  8. Preferred Shares – Stock that pays a fixed dividend
  9. Emerging Market Fixed income – Debt in emerging economies
  10. High Yield Fixed Income – Higher risk, shorter term debt

Each of these baskets will hold 20+ investments. As an example, the Canadian Equity basket will hold 25-40 stocks of our favourite Canadian companies.

Each of these baskets will behave differently at different times designed to give you smoother, more stable and predictable investment returns.

To further boost your investment return, more money will be allocated to baskets we expect to perform well based on current and future economic conditions. As the economic conditions change so too will the amounts we allocate to each basket.

Now you know, DON’T put all your eggs in one basket but DO consolidate your investments with one advisor with whom you work well.

Just make sure they:

  • use a proven diversified investment strategy
  • help you with your financial, tax, and estate planning
  • have your best interest at heart

Marc