Diversification of Investments AND Income

We have all heard about diversification when it comes to our investments.  Most people tend to believe that putting all your eggs in one basket is a highly risky approach to doing things.

This could apply on several levels. First, in terms of diversification among asset classes. For most of us, it’s probably not the best idea to be investing 100% in stocks – or bonds, or any other asset class.  Even if you did diversify well, you probably wouldn’t want to put all your money in one particular investment in an asset class. For example, within stocks, you wouldn’t want to put all your money into one particular stock – diversification within asset classes is important too.

All this being said, I think we can agree that for the average person, investments ought to be effectively diversified. But what about income?

There is regular chatter among many personal finance bloggers about the value of diversifying income streams. But I wonder this: among most mainstream (non-PF Blogger) folks, why is diversification of income not seen as being as critical as diversification of investments?

Think about it – most people will not put all of their investments into one particular company.  Sure, there are some who don’t believe in the concept of diversfication vs. investing in what you know, but that’s not super common. By default, if people have a 401k, they’re probably invested in many different companies by virtue of having mutual funds.  Or, if they own a home, they might have some equity in place. Perhaps they have bonds, or cash. Either way, it’s highly unlikely that their investments are tied up into one single company.

However, when it comes to income, many people seem to view it differently. Frankly, I used to be the same exactly way until the last year or so.  This meant looking at a job as THE source of income. Without a job, there’s no income.

Realistically, that’s probably the case with most people, I’d assume. It’s the way our society seems to be set up. However, this mindset seems to lag the sophistication we collectively have about diversification of investments. Shouldn’t income be diversified too?

If the primary source of people’s day to day money needs is their income – while savings are for retirement and other longer term needs – then it seems to make sense that income should be protected. This can happen by having a great career, but even then – you could be at the mercy of your employer, your industry, or economic conditions.  So, why not diversify income sources?

Again, while many personal finance bloggers think about this, I wonder why this concept of income stream diversification isn’t has seemingly top of mind as investment diversification?

Recommendation: let’s consider it to be essential to have multiple sources of income.

If we wouldn’t invest all our savings in one company, why invest all of our income potential in one company? Let’s really take action and work on multiple streams of income in the New Year!

My Questions for You:

Why do you think it is that many people might be hesitant to invest all their money in a particular company, but will totally depend on an income stream coming from one company in employment?

Are you taking action on generating an income stream that’s different from your day job?



  1. says

    I agree that income should be diversified. I make most of my money from blogging but that income comes from different sources. Plus I have other sources of income that I could ramp up if my income from blogging fell off.

    People still view employment income as secure and self-employment and other types of income as insecure even thought that isn’t necessarily true.

    • Squirrelers says

      Andy – I know what you mean about how people still view employment income as more secure….people can be laid off, downsized, or whatever at any time it seems.

  2. says

    You make a good point. While we were working, our jobs and family took all of our time and more so it was difficult to build another income stream – but if we had, we would be even better off now than we are.

    Now of course, we do have multiple types of income.

    • Squirrelers says

      Marie – life has it’s priorities to be sure, I know what you mean! We can all just do our best given our situation. Glad you’ve been able to bring in the extra streams.

  3. says

    The only thing worse than relying on only one source of income (your job) is also holding a large part of your investment portfolio in company stock or stock options. So many people I know are overweight in company stock, which means that if their employer went bankrupt they would lose both their income AND their company stock. So, my view is that one should diversify income streams and make sure their investment portfolio is not heavily tied to their employer.

    • Squirrelers says

      neo – I totally agree on the risks of putting all of one’s eggs in one basket, particularly the joining of investments and employment in the same entity. We’re on the same page.

  4. says

    Hi Squirrelers,

    As you know, income diversification is a big theme of mine. Putting 100% of assets in one stock is usually unwise; why should deriving 100% of income from one job be any different? It is also the way out of the rat race for those of us not independently wealthy!

    • Squirrelers says

      David – yes, it’s brutal that way. I’ve been there. Diversification is important…along with flexibility.

  5. says

    In my day job, of know of several companies where the bulk of their income derives from only one customer. Other colleagues are quick to deride this as a risky and sometimes foolish strategy. I’ve had a little fun a few times by pointing out to the colleague that their income also derives from one customer. It’s a mental switch to think of an employer as a “customer”, but it is. They get 100% of your services.

    • Squirrelers says

      101C – yes, I know what you mean. It’s really a paradigm shift that people need to see it. Really, the concept is the same yet people hold employment as being vastly different. I think it’s best to try to take a broader view of income.

  6. says

    Most people barely think about investing for their future and retirement. Do you really think they will think about diversifying an income stream? Not a chance. Some folks will simply be in the same position their entire lives, working and living check to check.

    • Squirrelers says

      Hard to imagine that people don’t think much at all about the future or retirement, but millions upon millions probably don’t.

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