Is Diversification a Mistake?
Listen to the experts👇🏽
- Thread -
Listen to the experts👇🏽
- Thread -
1/
Half the finance world screams
“DIVERSIFY”
and the other half scream
“NO”
What do you say?
Half the finance world screams
“DIVERSIFY”
and the other half scream
“NO”
What do you say?
• Warren Buffet
“Diversification is protection against ignorance, it’s a sound approach for a novice”
But….
“Diversification makes little sense for people who know what they are doing”
“Diversification is protection against ignorance, it’s a sound approach for a novice”
But….
“Diversification makes little sense for people who know what they are doing”
…… Warren Buffet reckons forcing yourself to diversify is a mistake.
“A really wonderful business is very well protected against shocks in the economy”
It’s better to have 3 quality businesses than 100 well known big businesses. In fact, it’s less risky….
“A really wonderful business is very well protected against shocks in the economy”
It’s better to have 3 quality businesses than 100 well known big businesses. In fact, it’s less risky….
……As Buffet puts it, “Why would I buy my 27th best business when I can add more to my second or third best business”??
• Peter Lynch
“It’s a huge mistake, I’d rather own one stock”
He is clearly against diversification, he recommends buying quality businesses instead.
He argues that buying mediocre businesses to balance a portfolio is insanity, because mediocre businesses go down.
“It’s a huge mistake, I’d rather own one stock”
He is clearly against diversification, he recommends buying quality businesses instead.
He argues that buying mediocre businesses to balance a portfolio is insanity, because mediocre businesses go down.
• Monkish Pabrai
“Look at entrepreneurs -They usually have everything in their business”
(all their eggs in one basket betting on themselves)
“They don’t feel like they should sell their business to buy smaller stakes in many other businesses, they are happy with single bets.
“Look at entrepreneurs -They usually have everything in their business”
(all their eggs in one basket betting on themselves)
“They don’t feel like they should sell their business to buy smaller stakes in many other businesses, they are happy with single bets.
…….. Monkish Pabrai
agrees with Buffet
“If you know what you are doing, diversification makes no sense, it seems like insanity to own 20 stocks”
Monkish follows a 10 by 10 portfolio
10 stocks with 10% on each, and in his personal portfolio he has about 5 stocks only.
agrees with Buffet
“If you know what you are doing, diversification makes no sense, it seems like insanity to own 20 stocks”
Monkish follows a 10 by 10 portfolio
10 stocks with 10% on each, and in his personal portfolio he has about 5 stocks only.
2/
How many stocks should I own in my portfolio then?
First you must be able to:
- Identify the moat
- Know the industry
- Trust management
- Analyze debt levels
- Understand the business
- Be sure about future growth
- Identify long term compounders
Learn about moat👇🏽
How many stocks should I own in my portfolio then?
First you must be able to:
- Identify the moat
- Know the industry
- Trust management
- Analyze debt levels
- Understand the business
- Be sure about future growth
- Identify long term compounders
Learn about moat👇🏽
https://twitter.com/aryan_kochhar/status/1424310640114425861
3/
How do I even begin to evaluate a company?
Start here👇🏽
How do I even begin to evaluate a company?
Start here👇🏽
https://twitter.com/BrianFeroldi/status/1430522195558768643
4/
When does diversification make sense?
•Active investors:
(Diversification makes no sense)
•Passive investors:
(Diversification makes sense)
When does diversification make sense?
•Active investors:
(Diversification makes no sense)
•Passive investors:
(Diversification makes sense)
5/
How many stocks do you have in your portfolio?
How many stocks do you have in your portfolio?
That’s the tweet, follow me @talkcentss for more financial threads.
You can expect:
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You can expect:
- Stock research
- Property threads
- 10x investment ideas
•Recap
- If you know how to analyze businesses then it’s crazy to own over 20 stocks
- Having too many companies to track won’t be manageable
- Some diversification is a good idea protects against unforeseen calamities
- It’s possible to hold only 1 stock in your portfolio
- If you know how to analyze businesses then it’s crazy to own over 20 stocks
- Having too many companies to track won’t be manageable
- Some diversification is a good idea protects against unforeseen calamities
- It’s possible to hold only 1 stock in your portfolio
• • •
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