[quote=“kb_snn, post:18, topic:7526, full:true”]
There are two points in @zygo23554
- "Diversification is refuge of those who not willing to put hard work " [/quote]
is obviously a nonsensical statement, but that’s now what I wrote. I wrote “Diversification is the refuge of those who aren’t willing to put in the hard work it takes to run a concentrated portfolio”. This taken along with the rest of the context of my post should make my intent clear. I ain’t demeaning a diversified approach, but I am skeptical of it’s effectiveness by itself. Going by what is written by the folks at ET diversification is synonymous with safety which is wrong. I can hold 40 stocks and still get hammered out of sight if my thought process isn’t clear.
Anyway this is an opinion which people can agree to or differ with, either way I am fine as long as the person is clear about why he chooses one over the other - which is usually not the case with most naive investors who keep parotting diversification at every opportunity. I ain’t suggesting you are one
I will stick to my guns on this. Compared to the average guy I have a better idea of how the rich have made their wealth (discounting those born into wealth) since I am a wealth manager by profession.
I am also drawing analogies from other fields for e.g. business - entrepreneurs find pockets they are good at, ride it till they get to critical mass and then de risk by diversifying. What creates wealth is focus, a virtuous cycle and some element of luck. Once you get beyond a threshold of wealth, diversification makes more sense than chasing a market beating approach where a setback can cost you a whole lot of money, time and effort.
If you are already rich, please diversify - that’s the most sensible thing to do.
If you aren’t wealth yet, diversification won’t do much to make you wealthy.
As for the large investors, I am sure Buffett was different as a budding investor from what he is today. I remember reading he had 50% of his net worth in a single stock in his early days that paid off big time.
However I am genuinely keen to know examples of how people became wealthy through a diversified approach and the amount of time it took them. I haven’t met any of them so far though I interact with HNI’s every day.