Dispersal is extinction insurance

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During the ice age 200,000 years ago, Our ancestors dispersed throughout the planet and that ensured their existence even if a disaster strikes in any one particular place.

Mammoth and other primates did not disperse. They remained concentrated in one place so they ran the risk of extinction if any disaster strikes that place.

This is a very useful analogy.

I believe the same concept applies in the professional lives of people today. It is important to cultivate interests in multiple areas. It is important to acquire a basket of skills rather than only one skill. In the age of computers, machines, and the Internet where human labor is increasingly threatened by effective machines, it makes sense to disperse our professional skill in a string of areas rather than being master of any one.

That will ensure our survival today if machines take jobs of any one area or worse if any particular field becomes obsolete altogether.

Same thing applies to investing. Never put all your things in one Basket. Always diversify. But I would like to add something else to this. Don’t diversify just for the sake of diversifying. Like if you understand only one company or sector and not other sectors then first learn about other sectors, analyze the companies in it thoroughly and only then diversify.

At present, I only understand IndiGo Airlines. I have 140 shares of it. I have been holding it since October 2016 and sitting on a 40% (50,000 INR) profit.

That is a single stock in my Demat account. Nothing else. But I am diversifying in other ways. I invest a portion of my money in Equity Mutual Funds, a portion of it in Debt Mutual Funds, I keep some cash in my Bank Account in case of emergency and I invest a portion directly in the companies after my own research like I did of Indigo Airlines.


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