{"id":893,"date":"2019-08-01T18:56:40","date_gmt":"2019-08-01T18:56:40","guid":{"rendered":"https:\/\/privatemoneysource.com\/blog\/?p=893"},"modified":"2019-08-01T18:56:40","modified_gmt":"2019-08-01T18:56:40","slug":"dont-put-all-your-egg-baskets-in-one-egg-truck-2","status":"publish","type":"post","link":"https:\/\/privatemoneysource.com\/blog\/?p=893","title":{"rendered":"Don’t put all your egg baskets in one egg truck"},"content":{"rendered":"\n

Clay Sparkman<\/em><\/p>\n\n\n\n

Colloquialisms are funny things.  We use them pretty much every day in\nour speech and in our writing and yet most of us, I suspect, though we know the\nmeanings of the expressions, frequently don\u2019t know why the individual words\nhave come to mean what they mean.  Take for example: \u201cDon\u2019t look a gift\nhorse in the mouth.\u201d  I must have been in my forties before I looked up\none day, scratching my head, and mumbled to myself, \u201cWhat the heck does that\nreally mean?\u201d  I remember asking my Dad about it. Having grown up on a\nfarm he was able to explain to me without hesitation that it was a little like\nwhat tire kicking is to automobiles.  So, there you go.  It all makes\nsense–if you know something about farms and horses, that is.  And while\nwe\u2019re on that topic, does anybody really do that: kick tires I mean?  I\nhave purchased maybe ten cars in my life, and I\u2019m pretty sure I never actually\nkicked the tires on any of them out on the showroom floor.  And still, it\nis a great image.  I wish I were that kind of guy who could pull it off.<\/p>\n\n\n\n

So with regard to investing, the egg analogies are kind of funny. \nFirst of all, there is \u201cthe nest egg,\u201d which seems to refer to one\u2019s entire\nsavings or investments.  It is singular however you will note.  You\ndon\u2019t have nest eggs.  You have a nest egg.  But given the fate of\nHumpty Dumpty and the fragility of eggs as such, we almost can\u2019t bear the\nthought of our entire fortune being so fragile.  (And yet, if we don\u2019t\ninvest intelligently, maybe it is.)<\/p>\n\n\n\n

And so of course to that end, we attempt to diversify our investments\u2014and\npretty much everyone is familiar with the expression, \u201cDon\u2019t put all your eggs\nin one basket,\u201d which immediately makes sense as an analogy\u2014that is until you\nstop to think about it.  Follow me here: if each egg represents a single\ninvestment, then perhaps each egg basket in the analogy represents an\ninvestment type or sector, and if you think about it, you still don\u2019t have a\nsecure investment strategy here.  Say you have ten baskets, each with a\nhandful of eggs in them.  Are you going to keep those baskets stored all\nin one place, and how are you going to transport them?  Surely you must\nnever put them all in the same egg truck!  I would like to propose thus a\nrevised version of the expression.  Can we all get on board with \u201cDon\u2019t\nput all your egg baskets in one egg truck?\u201d<\/p>\n\n\n\n

So then what is your point, you ask?  Well I do have one, and it is\nabout diversification as it relates to trust deed investing.  Most\ninvestors\u2014dare I say\u2014view trust deed investing as a single egg truck and put\nmany of their egg baskets (but certainly not all) in their \u201ctrust deed\u201d egg\ntruck.  And this is where we need to get really specific about this whole\nissue of egg security.  Almost all the investors I have worked with over\nthe years have been quite certain that they didn\u2019t want to put all of their\ntrust deed money into one single trust deed investment.  That is\npractically a given.  Typically, an investor with say, one million to\ninvest in trust deeds will look to put that into somewhere in the range of 5-10\nseparate trust deed investments.  So, we are all agreed that a dedicated\n\u201ctrust deed\u201d egg truck is needed.<\/p>\n\n\n\n

However, I would go a step further and suggest that if you are seriously\ninvolved in trust deed investing, you may want to deploy a small fleet of egg trucks\njust for trust deed investing.  And how does one do this?  Well, I\nused to think that this could be accomplished nicely by putting some into\nsubdivision projects, some into home construction projects, and some in\nstanding homes and commercial buildings.  But now I\u2019m not so sure: when\nthe real estate market for residential property tanked, residential\nsubdivisions, residential construction, and finished homes all began to merge\ninto one big thing.  Yes, they were all at different stages of the production\nprocess, but ultimately, they all became one thing: residential homes. \nAnd those homes all had to be sold or refinanced ultimately at the level of the\nindividual homes.  (The residential river flows in one direction, and\nalways comes to the same point where the river meets the sea.)  And in\nretrospect, commercial vs. residential didn\u2019t provide as much real\ndiversification as I would have hoped.  Though residential property was\nthe first to fall, commercial seems to have more or less followed along (lemming-like)\non its heels, and really not so far behind.  So: perhaps this type of\nversification was more like putting different types of egg baskets in the same\n“trust deed” egg truck (as opposed to deploying multiple “trust\ndeed” egg trucks).<\/p>\n\n\n\n

I would suggest that perhaps the best way to obtain effective\ndiversification in trust deed investments is to invest in multiple geographic\nlocals.  And in particular, I am thinking on a state by state basis. \nFor many investors, this goes against their fundamental instincts because they\nfeel safer investing close to home, where they know something about values and\nwhere they can deal more effectively (they feel) with the property if they have\nto take it back.  Those are valid issues and such instincts should not be\nignored, but it is important to weigh against them the fact that the massive\ndepreciation in home prices which continues to occur nationwide, happened at\nwidely varying times and to vastly different magnitudes in varying states\nacross this nation.<\/p>\n\n\n\n

So not to pick on anyone in particular, but If you think about it: when\nsub-prime hit the fan in 2007, if your only \u201ctrust deed\u201d egg truck was a\nsixteen wheeler with “SoCal” printed in large letters on the sides,\nyou and your egg baskets were in for a long, rough, treacherous ride down the\nmountain-side.<\/p>\n\n\n\n

— Clay (clay@privatemoneysource.com)<\/p>\n","protected":false},"excerpt":{"rendered":"

Clay Sparkman Colloquialisms are funny things.  We use them pretty much every day in our speech and in our writing and yet most of us, I suspect, though we know the meanings of the expressions, frequently don\u2019t know why the individual words have come to mean what they mean.  Take for example: \u201cDon\u2019t look a […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_s2mail":""},"categories":[2,9,26],"tags":[40,41,42,43,49,50,51,53,54,58,59],"_links":{"self":[{"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/893"}],"collection":[{"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=893"}],"version-history":[{"count":1,"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/893\/revisions"}],"predecessor-version":[{"id":894,"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/893\/revisions\/894"}],"wp:attachment":[{"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=893"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=893"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=893"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}