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Strategies & Market Trends : Value Investing
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To: Madharry who wrote (31193)6/16/2008 7:58:11 PM
From: Paul Senior  Read Replies (1) of 78813
 
Madharry, if I understand you correctly, that would be my basis for diversification.

"...if one has 20% of the portfolio in mfcaf type investments and 30% of those turn out to be multibaggers"

That is, somebody with a 20 stock portfolio would have 4 such investments, and 30% of the 4 or about one investment would be the multibagger.

With the same percentages and a a larger 50 stock portfolio though, that would be 10 chances (20% of 50) and maybe 3 or 4 winners (30% of 10). A more diversified portfolio as this gives more chances for more outsize winners to show up. I like that.

Imo such is important because even though a person could say he/she is going to try to structure their portfolio so somewhere within 20% of the portfolio they'll get multibaggers, it's my experience that my huge multibaggers can and do come from surprising areas - not just the 20% of a portfolio where one guesses beforehand where they might occur.
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