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Dazzling Diversification

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John Hunter

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Diversification overrated? Not a chance [the broken link has been removed] by Jason Zweig

A diversified portfolio always has, and always will, underperform the hottest investment of the moment.

For anyone with a sustainable ability to identify the hottest investment of the moment, diversification is a mistake. But if you really believe you’ve got that ability, you’re not just mistaken. You need to be hauled off in a straitjacket to the Institute for the Treatment of Investment Insanity.

Exactly right. As we posted previously Warren Buffett’s diversification thoughts are similar

If you are a professional and have confidence, then I would advocate lots of concentration. For everyone else, if it’s not your game, participate in total diversification. The economy will do fine over time. Make sure you don’t buy at the wrong price or the wrong time. That’s what most people should do, buy a cheap index fund and slowly dollar cost average into it.

You have to remember when Warren Buffett says “professional and have confidence” he doesn’t really mean just what those words say. He mean if you are Charlie Munger, George Soros, Jimmy Rodgers and maybe 10 other people alive today (maybe I am too restrictive, maybe he would include 50 more people alive today, but I doubt it).

Related: Dilbert on Investing – investment risks – Curious Cat Investing and Economics Search Engine

Comments

2 responses to “Dazzling Diversification”

  1. Ned Carey Avatar
    Ned Carey

    I think the longer your perspective the more focused, and less diversified you can get away with. Warren says his favorite hold period is forever. You can ride out a lot of ups and downs if that is the case.

    Thanks for stopping by my blog.

    Ned

    Reply
  2. Curious Cat Management Improvement Blog » The CEO is Only One Person

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