Should you put all your eggs in one basket?

Date Published: 19/02/2021 15:20

A few people made millions last year investing in one company. So should you put all your eggs in one basket? Jillian Thomas takes a look. 

You’ve no doubt heard the saying ‘don’t put all your eggs in one basket’ and that is the usual approach to investing. But can investing in one company make you a millionaire?

There were news stories over the festive period of investors making a lot of money by investing in just one company, the electric car maker Tesla. The value of Tesla shares rocketed by 700 per cent in 2020; at one point making the stock worth more than the combined valuations of General Motors, Ford, Fiat Chrysler Automobiles and Toyota, even though the company makes a fraction of the number of cars of those established rivals.

So, does it sometimes work to put all your eggs in one basket? Well, we need to remember that investments can just as easily go down as up. In fact, in May 2020 Elon Musk, the founder and CEO of Tesla, wiped over £10bn of the company value simply by tweeting he thought the share price was too high.

We also have to remember that for every success story there are failures too. Many people were persuaded to invest in Sirius Minerals, a mining company granted rights to mine potash right here in Yorkshire, on the Yorkshire Moors near Whitby. Many local people invested and invested heavily, putting their life savings and pension lump sums into the company. But the share value gradually fell and the company was taken over with shares trading at 5.5p, leaving many investors facing heavy losses.

There may been spectacular returns for investors in companies like Apple, Nike and Starbucks on their way to becoming household names, but many more companies have gone in the opposite direction. The impact of changing shopping habits and sudden impacts like the pandemic for example, mean that we cannot always predict what is coming up and so spreading the risk is a far safer way of investing.

The ‘Teslanaires’ will get publicity, because such stories are so rare. The long-term investor making careful decisions based on your needs and attitude to risk doesn’t make the headlines! But that careful, thoughtful approach is the one we take. It may not make the headlines, but it will help you sleep at night.

Please contact us if you want to discuss your investments. 

No individual investment advice is given, nor intended to be given in this article and liability will be accepted in respect of any action you may take as a result of reading this article. If you are unsure you are urged to take independent investment advice. 

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