There is an old saying, “Don’t put all your eggs in one basket.” I have spent nearly 2 decades hearing this saying from prospects, clients, and even family members. The manner in which this is interpreted has always confused me. Here is some of the rationale that makes we wonder, are people saying this for some situations but disregarding it for others?
First, let’s start with a history lesson. Miguel de Cervantes Saavedra, a Spanish novelist, coined the popular proverb in 1605 in Part I of Don Quixote. His version: “It is the part of a wise man to keep himself today for tomorrow, and not to venture all his eggs in one basket”. Now, years ago, I read Don Quixote for a college literature class, and without consideration to any financial wellbeing or planning, I didn’t quite connect the phrase as many interpret it today.
Here are some of the interpretations that I have gathered over the years in conversations with clients and prospects.
- Many believe that if you are planning for retirement, and in consideration to your investments, it would be best to not use one Financial Planner to aide in managing your investments.
- I have heard others that say don’t overlap to use the same mutual fund family. **
- And I have strangely heard comments from others that involved using multiple locations and providers to maintain a safe level of trust, as to allude to having one Advisor manage all your investments may lead that Professional to lie, cheat, or steal away your life savings.
In these examples lies my confusion.
Two months ago, my car needed to go in for service. Now I have known my current mechanic for 15 years. He does great work; and I assume he is always treating me fair, seeking a fiduciary stance to my best interest, and charging me appropriately for work done. I also know that in the 15 years of our relationship, he has had to outsource the work to other specialized shops to get the intermediary work done. However, when it was all said and done, I work with him….and trust those he trusts if he needs to outsource work.
In 2017, I was referred to a contractor that would complete a garage/shed for me. They did a great job and grabbed the entire project by all its needs, doing what they could themselves, and hiring out the balance to people that work in the areas outside of their specialties. This would not seem unusual to most anyone that has ever built a home. However, what stuck with me through the entire construction project was that I only worked with one guy. He facilitated at least 5 sub-contractors and organized all changes that would need to be made on-the-fly with only him as my contact. What is the take-away?
As a licensed Financial Advisor and Fiduciary, my job is, by requirement, to work in the best interests of my clients when assessing their financial situations, making changes as needed, and suggesting solutions to get and keep them on track for their goals. In our practice, we work with great “sub-contractors” that assist us to the professional decisions outside our purview, keep us continually educated to those decisions in our purview, and bring a valued continual oversight to actively managed investments.
I recognize that not all people mean to have an “Easter egg hunt” every year in multiple front yards. So, if you have every heard yourself saying “Don’t pull all of your eggs in one basket.”, I challenge you to question what your objective is. For some, this may be a relatable way to say you believe in diversification*. For others, it might simply be multiplying confusion in an already confusing world.
At various times in life, we all need a partner. Let us know if a partnership with Rundahl Financial Consults is right for you.
Blessings!
Dan
*Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk.
**Mutual Funds and Exchange Traded Funds (ETFs) are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing in Mutual Funds. The prospectus, which contains this and other information about the investment company, can be obtained directly from the Fund Company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.