A few holdings with radically different types of market behavior will do more to smooth out the pattern of portfolio returns than 50 or 100 holdings that move up and down together.
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What’s comfortable is not the right way to invest. You must own things that you’re uncomfortable with. Otherwise you’re not really diversified.
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We think diversification is only a surrogate, and usually a poor surrogate, for knowledge, control, and price consciousness.
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When picking a list of growth stocks for long-term investment, broad diversification of the risk is the first and most important principle to follow. No one can look ahead five or ten years and say what is the most promising industry or the best stock to own.
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An investor is not likely to obtain superior results by buying a broad cross-section of the market. The more diversification, the more performance is likely to be average, at best.
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You can only know so many companies. If you’re managing 50 or 100 positions, the chances that you can add value are much, much lower.
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The addition of the one-hundredth stock simply can’t reduce the potential variance in portfolio performance sufficiently to compensate for the negative effect its inclusion has on the overall portfolio expectation.
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Diversification is protection against ignorance, but if you don’t feel ignorant, the need for it goes down drastically.
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If you really know businesses, you probably shouldn’t own more than six of them. If you can identify six wonderful businesses, that is all the diversification you need and you’re going to make a lot of money.
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If you are not a professional investor, if your goal is not to manage money in such a way so you get a significantly better return than the world, then I believe in extreme diversification.
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Rather than own a little bit of everything, we have always tended to place our eggs in a few dozen baskets and watch them closely.
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I think the secret is if you have a lot of stocks, some will do mediocre, some will do okay, and if one or two of ’em go up big time, you produce a fabulous result.
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Diversification of risk matters not just defensively, but because it maximizes returns as well, because we expose ourselves to all of the opportunities that there may be out there.
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Diversification is a safety factor that is essential because we should be humble enough to admit we can be wrong.
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I view diversification not only as a survival strategy but as an aggressive strategy, because the next windfall might come from a surprising place.
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The only time you’re really diversified is when you have assets you don’t want to own.
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I think diversification and all the stuff they’re teaching at business school today is probably the most misguided concept everywhere.
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There are huge advantages for an individual to get into a position where you make a few great investments and just sit back. You’re paying less to brokers. You’re listening to less nonsense.
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