Diversify Your Income Just Like You Diversify Your Investments

Diversify Your Income Just Like You Diversify Your Investments

No financial advisor in their right mind would tell you to put all your investments in a single company. When it comes to your income, you should probably take a similar approach. Photo by Alan Cleaver.

Passive income is one of the holy grails of personal finance, and one we talk about a lot. However, as business site Entrepreneur points out, it's easy to funnel all your effort into one job or even one type of income and lose sight of the surrounding markets. While it's fine to have one skill you rely on day-to-day, there are too many stories of a business that collapsed or an industry that moved on leaving someone without a way to pay their bills. While you're building your income streams, use the concept of diversification to hedge your bets:

Everyone can agree: A business should never rely on just one customer to generate the majority of its revenue. When that client moves on — poof! — there goes the business. But you need to apply that thinking to the bigger picture, too. Are you relying upon your business to generate all your personal income? That's a problem.

While Entrepreneur frames this topic from the perspective of a business owner (it is in their name, after all), the idea applies to anyone. If you have a day job, consider a side business that relies on other skills that you're not utilising to their fullest potential. If you're thinking of buying into a business, think outside the one field you specialise in. No matter what you're aiming for, try to avoid putting all your eggs in one basket.

Are You Diversifying Your Income? You'd Better Start. [Entrepreneur]

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Comments

    Right now, I am buying shares from companies that pays dividends. I am building a portfolio that can give me a ROI of roughly $2500 a month.

    I understand that the market will play a bigger role too, so I am not going to be relying on shares for passive income only. I will be focusing on other investment alternatives too.

    Last edited 14/03/16 10:56 am

      Hi infiltrator15,
      I am just learning about shares and how to build a portfolio. Do you have any reading lists or websites that you would recommend? Learning how to build a passive income through shares is something I am interested in. Thanks!

        I would recommend the ASX website, http://www.asx.com.au/education/first-time-investors.htm
        its a good place to start learning about shares. They also have a demo account, that you can sign up for and use it for practicing purposes.

        Commsec.com.au is my broker, and I use them for placing orders on the market. They also have lots of training material as well as a helpful community that you can ask questions.

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