The need for Diversifying Investment Portfolio

Diversifying is not only about the risk-reducing strategy that allocates investments through different financial instruments, sectors and other categories. Let’s see what more can we get from Diversifying our portfolio

There’s a gear that is incredibly important for almost all athletes.

If you’re a batsman, your bat is extremely necessary.

Your racket might be crucial if you are a tennis player.

But almost all athletes playing a stand-up sport accept that one gear is highly crucial: shoes.

(If you’re wondering which sports aren’t played standing up, they include swimming, cycling, and a few others.)

There hasn’t been a decent pair of shoes in over a century.

For shoes, one of the main challenges is that the bottom foam is compressed over time.

It affects athletes’ performance.

It was an issue, but it wasn’t a super big issue.

In the United States, Frank Rudy worked as an aerospace engineer.

In 1945, he was drafted into the army and later served in the aerospace market.

Frank was a self-professed inventor. He was the owner of over 250 patents.

The engineer had a bright idea, one that would solve the aforementioned shoe issue.

With this idea, he approached a few businesses.

His theory will avoid deformation of the sole of the shoes.

Everybody turned him down.

He approached numerous companies until one of them decided to partner with him.

Frank’s intention was to replace the foam.

When stressed, balloons do not deform. Footballs don’t deform. Car tires don’t deform.

Wind, not deforming it.

He chose to use a tiny bag of air in his shoes, instead of foam that deforms over time.

And so, Nike Air was born.

Nike offers a wide variety of footwear. The Nike Air line has a cult following that many of Nike’s other shoe lines lack.

It was the mid-1970s at the time.

A designer had the bright idea a few years later to make the airbag transparent from the side of the shoe.

It significantly improved the cool factor.

Very soon, Nike Air became a commonly embraced and highly praised shoe technology.

Nike had made a bet on air cushioning technology, and it had paid off.

Even though Frank had approached several of them before reaching Nike, this was something Nike’s rivals had struggled to capitalise on.

What did Nike see in Frank’s technology that other companies didn’t?

Ok, what Nike saw, we don’t know.

What Nike does is also something almost all great investors do.

Nike Shox is a brand you might be familiar with.

This is a pair of shoes with a spring-like mechanism.

They’d worked it out. But just a bit.

Not every investment pays off.

You’ll find a plethora of shoe lines if you look back into Nike’s past.

There are very few of them who become extremely popular.

Some of them are complete losers.

Many are somewhere in between.

And it’s anyone’s guess, they’d all have a common cost of growing.

If Nike loses the money it invested on production if a shoe line fails, it moves on.

If the shoe line is normal, the initial cost is recovered and it goes on.

They print money from the bucketloads if the shoe line succeeds.

Experimentation is inexpensive for them. Success is followed by a large amount of money.

Whatever sum they have spent is the greatest potential loss they will experience. That is everything there is to it.

They could make a return that is multiples of their initial investment.

That is how your investment should be prepared.

No matter how good things are, you can only get so much in return from those investments. Some, on the other hand, will continue to ascend as though there is no limit.

Which of your investments is most likely to hit zero and stop? Everything of them?

But which are more likely to cross a certain point and then stop? They are, to some degree. Though not all of them.

One Investment can bear the loss of all other investment if it’s good one.

Ensure that you really invest in such investments and diversify.