Money Matters with Nimi: Eggs & Money Matters

The egg has long been a symbol of fertility, rebirth, a beginning and a symbol of new life. Eggs and Easter have almost become synonymous, as eggs have been associated with the festival of Easter, which celebrates the death and resurrection of Christ, since the early days of the Church. You will not find Easter Eggs in the Bible, but many cherished Easter traditions and customs have been around for centuries.

As we watch everyone tuck into their eggs, investors should be reminded of some of the idioms associated with eggs and money matters in these fables.

Do you remember the tale of “The goose that laid the golden egg”? It goes like this; Once upon a time there was a farmer who owned a goose. One morning he found that the goose had laid a golden egg. Thereafter, each day the goose would lay a golden egg. The farmer soon made a fortune by selling the golden eggs. Soon, he became impatient and was no longer satisfied; he wanted all the golden eggs at the same time. One day he slashed open the gooses belly to try to retrieve all the golden eggs. He was left with a dead goose and no eggs.

“Killing the golden goose” and “Don’t count your chickens before they are hatched” have become metaphors for any short-sighted action that may bring an immediate reward, but could ultimately prove to be disastrous. Because he was greedy and impatient, the farmer ended up with nothing. Like this farmer, many investors are lured by great expectations and greed.

There are several tales attributed to the origins of the term “don’t put all your eggs in one basket.” In its contemporary context, it refers to the concept of diversification as an investment strategy and the fact if you put all of your money in one investment, your return will depend solely on the performance of that investment. Thus if the investment performs badly, your investment is at risk.

Diversification can significantly reduce investment risk. By diversifying across the various asset classes such as cash and fixed income securities, stocks, and real estate, you can reduce the risk of market volatility as they all perform differently. Stocks, generally offer the highest returns among these three classes, but they also carry the highest risk of loss. Bonds may not be as lucrative, but they offer more stability than stocks. Money-market returns are usually low, and your savings may not keep pace with inflation, but your investment is relatively secure.

Diversifying within the various asset classes is key to a successful, balanced portfolio. With stocks, for example, you don’t want to invest exclusively in big established companies or small start-ups. True diversification means having your money in different sectors of the economy. You need balance.

Your risk appetite, your financial status and income needs, your age and time horizon, and your financial goals will guide your asset allocation strategy in determining the most appropriate mix for you.

The use of the term “nest-egg” to refer to savings dates back to the 16th century. The practise of putting a real or china egg into a hen’s nest was to encourage her to lay more eggs. The connection between this and the ‘savings’ meaning may be that the egg that was placed in the nest could be later retrieved, after the hen had laid, or that by putting away an egg, that is, saving, you can enjoy growth as more eggs are laid.

The nest egg is money set aside in savings, money market or investment accounts that is designated for some specific purpose; most common is the reference to funding for retirement. Ideally you should set aside an amount on a regular basis to grow your nest egg and it should be kept safe and allowed to grow untouched except for its intended purpose.

Investing is a journey towards achieving your long-term goals. Develop your own long-term strategy and stick with it. If you focus on your goals, you will not be easily distracted by volatility and market hype. Your own unique circumstances should ultimately determine how much, how and when you invest. Watch your own chickens and appreciate your own eggs!

Have a Happy Easter!

Photo Credit: Dreamstime | Gianna Stadelmyer