National Pizza Day is just around the corner—on Sunday, February 9th! It’s the perfect time to get your friends together and decide on your favourite pizza toppings. Whether you’re into classic pepperoni, adventurous pineapple, or something spicier, there’s a pizza for everyone. But here’s a fun twist: did you know your pizza can teach you something important about managing money? Let’s chew into how pizza is connected to investment diversification.
What is Diversification, Anyway?
Imagine your pizza is an investment portfolio. Instead of a plain cheese pizza or one with only pepperoni, think about a pizza with a variety of toppings: cheese, pepperoni, veggies, BBQ chicken. Each slice adds something unique, making the whole pizza more exciting.
In investing, diversification works the same way. Instead of putting all your money into one thing (like a single stock), you spread it across different investments—stocks, bonds, real estate, private equity etc. This helps reduce risk and opens more opportunities for growth.
Why Is Diversification Like Pizza?
Lower Risk, More Flavour: If you only have one topping on your pizza and you’re not in the mood for it, you’re stuck with a pizza you might not enjoy. But with multiple toppings, you’ve got options. Similarly, in investing, putting all your money into one stock is risky. If that stock drops, you could lose a lot. But by spreading your money across different investments, you’re less likely to be hurt by one bad choice.
Finding Balance: A great pizza is all about balance—too much cheese, and it’s overwhelming; too little, and it’s dry. The same goes for your investments. Some investments grow quickly, while others grow slowly. But together, they balance each other out, helping your portfolio to handle market ups and downs.
Taking a More Active Approach: Sometimes, you can take a more active approach to your investments, just like ordering your favourite pizza with the toppings you want. For example, having a direct ownership of investments like forests can be a good way to diversify. While forests may not grow as fast as some stocks, they offer a sustainable option that may align to your ethical values.
Actively choosing investments like these, along with other options, can help lower your risk and provide another level of diversification.
Getting the Best Bang for Your Buck: Diversifying your investments isn’t just about picking random things—it’s about getting the most value. Like when you buy a pizza combo that has the right mix of pizza and sides, you feel more satisfied and are not overloaded on one thing. By carefully choosing where you invest and mixing things up, you ensure a good value, like ordering a pizza in a meal deal.
Why It Matters
Just like Grandma’s advice— “don’t put all your eggs in one basket”—diversification helps reduce risk and increase the potential for rewards. By spreading your money across different areas, you’re better prepared for market changes, just like you’re better prepared for anything when your pizza has more variety.
But remember, diversification isn’t foolproof. If all your investments are too similar (like too many slices with the same topping), you might miss out on the full benefits. You need to make sure your investments are well-balanced and fit your financial goals.
In the Christian KiwiSaver Scheme’s Balanced Fund and Growth Fund, we balance investments across bonds and other fixed interest assets, shares, private equity, and even a forest. We also follow our own Ethical Investment Policy, working to align our investment choices with Christian values, while aiming to grow our members’ money.
So, this National Pizza Day (or any day!), while you’re enjoying a well-balanced pizza, think about how diversifying your investments can help make your financial future just as satisfying. More slices, more flavours, more chances for success!
Christian KiwiSaver Scheme is managed and issued by The New Zealand Anglican Church Pension Board (trading as Anglican Financial Care). The Product Disclosure Statement can be found here Documents | Christian Kiwisaver Scheme.