You will often hear the word “diversification” when you discuss about investmetns. Diversification is important, in fact it is still considered one of the most effective risk managment tool, minimizing investment losses.

What does Investopedia say about diversification? (a favorite on-line site for invesmtment stuff)

“A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.

Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Therefore, the benefits of diversification will hold only if the securities in the portfolio are not perfectly correlated.”

What does the Bible say about diversification?

“But divide your investments among many places,
for you do not know what risks might lie ahead.”

— Ecclesiastes 11:2. New Living Translation.

Both definitions are essentially the same but I like the one from the Bible better — I understand it better and I am sure it is the truth.

“If money is your hope for independence, you will never have it. The only real security that a man can have in this world is a reserve of knowledge, experience and ability.”

— Henry Ford

Jim Rohn wrote a very good article about the Ant Philosophy. When you study the ants, they really are amazing creatures largely because of their characteristics and their characteristics are very applicable to personal finance.

When you look at how the ants go about their business, they are very structured and deliberate. They know the value of hard work and they definitely know the value of having a storehouse. If we can apply the characteristics of ants into they way we go about our life, we definitely are more prepared with the challenges of life, and definitely more prepared for our life events — emotionally and financially!

The way the ants behave is so amazing and long before Jim Rohn thought about the said creatures, the Bible already made reference to those wonderful creatures. God actually wanted us to be like ants — “Go to the ant, you sluggard; consider its ways and be wise!” (Proverbs 6:6, NIV). And for a good reason… “Ants are creatures of little strength, yet they store up their food in the summer.” (Proverbs 30:25, NIV).

You want to achieve financial freedom? Be like the ant!

The Ant Philosophy

by Jim Rohn

Over the years I’ve been teaching children about a simple but powerful concept – the ant philosophy.

I think everybody should study ants. They have an amazing four-part philosophy, and here is the first part: ants never quit. That’s a good philosophy. If they’re headed somewhere and you try to stop them; they’ll look for another way. They’ll climb over, they’ll climb under, they’ll climb around. They keep looking for another way. What a neat philosophy, to never quit looking for a way to get where you’re supposed to go.

Second, ants think winter all summer. That’s an important perspective. You can’t be so naive as to think summer will last forever. So ants are gathering in their winter food in the middle of summer.

An ancient story says, “Don’t build your house on the sand in the summer.” Why do we need that advice? Because it is important to be realistic. In the summer, you’ve got to think storm. You’ve got to think rocks as you enjoy the sand and sun. Think ahead.

The third part of the ant philosophy is that ants think summer all winter. That is so important. During the winter, ants remind themselves, “This won’t last long; we’ll soon be out of here.” And the first warm day, the ants are out. If it turns cold again, they’ll dive back down, but then they come out the first warm day. They can’t wait to get out.

And here’s the last part of the ant philosophy. How much will an ant gather during the summer to prepare for the winter? All that he possibly can. What an incredible philosophy, the “all-that-you-possibly-can” philosophy.

Wow, what a great seminar to attend – the ant seminar.  Never give up, look ahead, stay positive and do all you can.