The danger of keeping all of your eggs (or beans) in the same basket

Shares in baked bean purveyor Kraft Heinz fell 27% in a day last week as markets reacted to an update in which the company took a USD15 billion write-down in the value of their assets.

They also disclosed that they were being investigated by the US Securities and Exchange Commission due to their accounting policies.

This is quite a fall from grace; it was only few months ago that Kraft Heinz were seriously looking to acquire Unilever.

You can read more about the background to the story here.

However, the key takeaway here is that holding a large percentage of your portfolio in the shares of a single company is risky because things like this can and do happen.

The risk is doubly so, when the shares in question are those of your employer because now you are relying on said company for your financial future as well as your monthly paycheck.

The power of diversification

“Holding a diversified portfolio of asset classes and investments means you don’t have to try to pick and choose the best performing section each year (which is impossible to do anyways).” – Ben Carlson @awealthofcommonsense

This chart is one of my favourite ways of demonstrating the importance of diversification for those who are thinking about retirement or who have already hung up their spurs.

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