The power of diversifying

What does it mean to Diversify?

For years we have been told to diversify our portfolios. But what does that actually mean? According to webster the word diversify meansto balance (an investment portfolio) defensively by dividing funds among securities (see security 3) of different industries or of different classes. Ok...so what does that mean to us and how can we apply that into our lives and finances?

How we diversify

For my wife and I the simplest way to diversify is to make sure that we have multiple streams of income coming in from very different sources. So, for instances, we both currently have our full-time jobs which are in very different industries, along with both of our 401k stock options. We also have a part-time brick-and-mortyer business on the side that we are attempting to build up. Then we also have our affiliate stuff. Our affiliate stuff itself is diversified through a few different sites to increase our potential audiance and sales.

Why should we diversify?

So we now know what it means to diversify, and I've illustrated some real-life ways that my wife and I diversify...but why should we do it? What benefit do we get out of having so many different pots in the fire? Is it worth all the time and effort we spend on each pot? Well, for us the answer is simple. It is worth it to us to diversify and to spend all of the time and energy that we do in each area. For us, diversifying our streams of income provides a little more security. We don't have to worry as much if something happens to one stream because we have the others to keep us afloat.

Do you diversify? If so, how? What have you found to be the most beneficial part of diversifying your portfolio?