The Temporal Basket

Don’t put all your eggs in the same carton! Use the Temporal Basket.
Mar 8, 2019 by Amit Kumar

The Temporal Basket

We have all heard the saying ‘don’t put all your eggs in the same basket’. In the investing context this means, don’t put all your money in the same type of financial instrument or asset class. This idea is summed up in the word, ‘diversify’. Diversification involves putting your eggs in different baskets.

So, for example, you invest hundred dollars in Fund Q. The fund instead of rising a phenomenal 50%, actually falls by 50%. Your hundred dollars becomes $50. At the end of this period the fund actually rises by 50%, as originally expected. Your investment is now worth $75 and you suffer a loss of $25. If you use the temporal basket, you will spread your investments across time. At the end of the first period, you will invest another hundred dollars. When the fund rises by 50% as originally predicted, your hundred dollars becomes $150. The total value of your investments is $150 plus $75, which is $225. You have made $25 profit on your investment of $200. This may be more easily understood from the table below.

Spread Your Investments Over Time

So use the temporal basket. Diversify over time!

© New Light Pte Ltd 2022