Adding arrows to your quiver: it’s an archery metaphor that refers to having a lot of solutions to a single problem. I don’t know enough about archery to extend this metaphor in any direction, so let’s just leave it laying right there and move on, confident that you know what the heck I’m talking about.
Versatility is of paramount importance to many arenas in life. In investment, “versatility” is replaced by the more nuanced word “diversification”. Diversification is all about having multiple strategies to solve the simple problem: not having as much wealth as I need or want, at some point in the future.
Diversification is important in investing. That’s because there is risk inherent to all forms of investment. But risk isn’t unique to investors. If you have money AT ALL, you risk losing its value all the time. That’s because money losing “buying power” as time goes by. Currencies inflate, which dilutes the value of any one unit of measure. That same dollar bill that bought you a steak dinner in 1968 won’t so much as buy you a Slim Jim today.
So clearly, not investing isn’t the solution to the risk of losing money over time, but neither is investing recklessly. Let’s say you were to invest in a single stock. Stocks jump and jive all the time. They are more likely to lose value than they are to succeed, so if you invest only in a single stock, you’re likely to lose your pants. That’s why people invest in multiple stocks, often in packages known as mutual funds or ETFs. The big winners more than carry the losses of the losers (or at least, that’s what USUALLY happens). It’s like constructing a bed of nails. With lots of nails, you can get a good night’s sleep. With just one or two nails, well, let’s not think about that.
But mutual funds and ETFs are simply examples of diversification within a single investment form. If you invest solely in these kind of stock offerings, you’ll likely succeed, but not as well as if you diversified within investment forms. What are some of these other forms? Real estate, foreign markets, FX trading with CMC Markets, and many other options.
Let’s talk about FX trading for a moment. Unlike ETFs, which are meant to mature over decades and certainly won’t pay out anytime soon, FX trading is about creating mature investments within hours. That’s because you are making speculations on the values of currency pairs, which come to fruition, for good or ill, in the immediate future.
As in the linked example above, if you are able to correctly anticipate the direction in which a currency value will go, you’ll receive dividends in relation to how much you put on the line. It’s a kind of investment that you can acquire great skill at through repetition. And it’ll pay off soon, not like the traditional forms of passive investment mentioned above. So invest in all types of investments, for the long term future and for the immediate future. This way you’ll see payoffs today, next year, and decades from now.