Don't place your eggs all in one basket
This is a wisdom we have known that has been handed down from
generation to generation. And it is also applied in business. If investors
were to place all their assets on one particular investment, that would involve
a high risk because when the investment fails, everything is lost. However,
when you spread your investment over two or three instruments, then if one
fails, the rest are saved and can earn for you. Those who favor the high-risk
type of investing, usually reap in a lot of profits when the investment
succeeds because of the high interest that is attached to the investment.
Those who take the more conservative style
towards investing, are more secure in their investment, although the profit
they receive is not as high. The latter is certain to bring your business
to endure in the long term while the former style of investing - the high-risk
type, will likely make your business short-lived. What is important in
any business venture is to always decide what is best not only for the
short-term, but most of all what its effect would be in the long-term.
It is the long-term effect that we must put our eyes on if we want our
business to be solid and stable.
The benefit of insurance
Insurance instructors always tell the story of a wise old merchant who had
the strategy of delivering his goods to a far-away country in three big
ships. He knew that if he put all of his goods in one really big ship, when
a storm comes and sinks the ship, everything of his goods and merchandise
go down with the ship. And so, he always sends his merchandise in three
ships. And true indeed, when one of his ships went down when a violent
storm blew in the ocean, he still had two ships which were able to deliver
the rest of his goods to its destination.
Insurance can even make this situation more secure and stable. If for
instance, that old merchant were to insure all three ships, then when even
one ship of his goes down, he shall not lose everything but rather can get
an amount to compensate for the loss of everything in that ship. Insurance
helps the business owner and secures him against big and devastating losses.
Tip for those extending credit to customers
In the same direction as the principle we are exploring about, it is wiser
to extend smaller amounts of credit to those with good credit-standing. It
would be indeed a higher risk if you lend big to one customer at a high
interest. When that customer or client is unable to pay, your loss is big.
But for the style of lending small, to many good customers or clients,
when one of them suffers from anything that will bring down his or her
financial standing low because of unforseen and unfortunate circumstances,
though he may once have been in good credit standing, his nonpayment of
the loan would not be such a great loss to your business, and your business
can move on for another term.
Tip for those with savings and investments in banks
As with the style of not putting all your investment in one financial
instrument, so it is with your savings. Deposits are insured up to a certain
amount of money. It is wise to place your savings up to the amount of the
insurance stated by your government insurance. It need not be exactly at
the same amount but at least more or less within the range of the amount that
is covered by insurance. And what is best is to place all of your money in
banks that are conservative in giving interest income. Usually, banks who
do this are more stable and much more established for the long-run. Banks
who give too high an offer of interest, tend to be also liberal in their
investments. Being conservative in our style of investing, we should also
find banks and other business entities who are also conservative in their
style of investing. Otherwise, when one goes down, then everything in our
business network falls down. If we opt for more stable, lasting and
conservative business systems, structures and institutions, then we will
be more assured of a long-term investment that will continually reap in
enough income to give us a good quality of life.
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