True investors are not random stock pickers.
They take out risk by understanding the investments and their intrinsic value, rather than by spreading the risk across more companies.
Smart investors are focus investors who drive toward deep understanding of their investments without diluting possible returns through diversification.
They see danger in owning too many investments, which may be beyond the scope of what they can manage or keep track of.
Here's the paradox: Instead of reducing risk through diversification, risk may actually increase as it becomes harder to follow the fortunes of so many businesses.
That is why Buffett and others reject diversification per se as an investment strategy.
They prefer to reduce risk by watching a few companies and investments more closely.
"Diversification is for people who don't know what they're doing." Warren Buffett.
They take out risk by understanding the investments and their intrinsic value, rather than by spreading the risk across more companies.
Smart investors are focus investors who drive toward deep understanding of their investments without diluting possible returns through diversification.
They see danger in owning too many investments, which may be beyond the scope of what they can manage or keep track of.
Here's the paradox: Instead of reducing risk through diversification, risk may actually increase as it becomes harder to follow the fortunes of so many businesses.
That is why Buffett and others reject diversification per se as an investment strategy.
They prefer to reduce risk by watching a few companies and investments more closely.
"Diversification is for people who don't know what they're doing." Warren Buffett.
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