The following content is not a personal recommendation to buy shares in the companies listed as I am not taking your personal financial situation into account.

Put All Your Eggs In One Basket And Watch The Basket

The counterintuitive approach of the world’s most successful investors… 

It has always amazed me that business schools, financial planners and money managers are forever running the line that investors need to be diversified and should not put all their eggs in one basket. 

But the facts are that the most successful investors are not diversified at all. 

The most successful investors (such as Buffett, Soros, Tepper, Icahn, Munger and many others) have never used a diversified approach. 

The most successful investors put all their eggs in one basket, and then watch the basket closely. 

They own a concentrated number of companies. 

This is totally counterintuitive to most financial planners and money managers, who consistently underperform with a diversified approach. 

The average money manager has 80 – 90 companies in their portfolio, meaning each company only makes up between 1% – 2% of the entire portfolio.  There is never any conviction with a 1% – 2% approach and therefore never any big windfalls. 

On the other hand…

  • Warren Buffett manages $270 billion and has 40% of his money in one company.
  • David Tepper looks after $7 billion and has 20% of his money in one company.
  • Activist billionaire Carl Icahn has 49% of his money in one company.
  • And Charlie Munger (who is worth over $2 billion) has 70% of his money invested in just two companies.  

The only reason to be diversified is if you want to earn below average. 

If you have your money in half a dozen companies, those companies are going to have your attention. But if you have 25 – 50 or more companies in a portfolio you stop paying attention. 

And how can you pay attention to 25 – 50 companies anyway? Especially the losing ones that may need to be sold. 

It may sound harsh, but a diversified approach is really an admission of ignorance. An admission of not knowing enough about a concentrated number of companies that will likely outperform. 

Diversification will never result in any meaningful returns for the average investor. 

The way to increase your returns is to learn how to take large concentrated investments in companies that have global growth potential and have the ability to grow their revenue and profits… which will likely see the share price rise.  

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