When it comes to being a sensible investor, one of the first rules is not to put all of your eggs in the same basket.  Where possible, you should try and put your eggs in as many different baskets as you can.


With stocks and shares, this can be done easily via the use of collective investment funds which can allow you to spread your investment over hundreds or even thousands of different investments.  You can design a portfolio which is spread across many different assets, asset types, geographical locations and business sectors in order to spread investment risk.


When it comes to investing in residential property, this becomes much harder.  For some people in certain occupations you could say they are spreading risk in another way.  For example if a fireman or a doctor was to invest in a residential property, there is little correlation between their job and the residential property market.  If the property market is in decline, there will still be fires and people will still get poorly.  But what about if your occupation and therefore your income is connected to the property market, for example a builder, an estate agent.  If people in these jobs invest in property, they could well find that they lose their job and their investments both at the same time.


From my experience however, it is people who are in jobs connected to the property market in this way, who favour investing in property more than anybody else, because they think they are in the know and have an advantage over others.  I would argue these are the people who should be doing the opposite and finding an investment which does not rely on the property market being buoyant.


Another example of putting your eggs in one basket is when people invest in savings schemes at work, such as ShareSave.  Due to the tax advantages and good terms these schemes run on, I am not saying not to do it, but you need to consider the strength of your employer, and whether you can afford to risk putting your job and some of your savings in the same basket.


Jenny Croskery Cert CII (MP)

15th April 2019

Put Your Eggs in Different Baskets