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Seeds of Wisdom: A Tale of Diversification and Asset Allocation
06 Sep 2019

One fine day, a saint passed by his house and observed this process. He called the man and said, "Child, you are doing your process correctly, but you must trust the process and allow some time for the seed to develop. In the meantime, go buy some other variety seeds, plant them in your garden, and repeat the process. "You will see some results." The following day, the man purchased tomato, ladies' finger, and green chilly seeds. He planted them in various locations throughout his yard and began the same process.  Over a few days, he saw some results with chilly seeds that motivated him. He repeated the process on all the seeds. A few weeks later, he noticed growth in the ladies' finger, which greatly encouraged him. He then noticed some results with tomatoes. He noticed snake gourd development after a few weeks. He was overjoyed and went to thank the saint.

The saint said "Dear child, if you want your desired result, you must wait,". However, focusing solely on one thing will make you fearful, and you will expect a quick result to justify your process. If you diversify your efforts and concentrate on 2-3 things, your fears and expectations will also diversify, and you will achieve a positive outcome. So, just spread your efforts out and wait patiently." The saint's teaching is known as asset allocation and diversification. This applies to investments as well. If you put all of your money into one investment, you will have a lot of fear and expectation because you will be completely reliant on that investment. If any bad news or event occurs in the economy, your entire investment portfolio may suffer, causing you to panic. However, if you diversify and invest, your risk and return will be balanced. This means that by spreading your investments across different assets, you can achieve a more balanced and stable outcome. Not all assets will perform well at the same time, but one will rise while another falls. This way, you won't feel as though all of your money is being trapped. That's why asset allocation is more important.