Nikkei86 - when I was a college grad, my portfolio was smaller too, in terms of the position # and the $ (at that point it was DM) value too. I had maybe a handful positions, mostly to keep my commissions at a manageable level.
Now my portfolio is somewhat larger and I don't particulary like the idea to loose a year worth of savings with a single bad decision. Commission matter less too, in relative terms, so I see no harm in diversifying.
I could probably do with 15-20 position but my investment principle is to average down. Well sometimes I can, sometimes I don't because the stock goes up and I rarely average up. So I get stuck with stub position which I neither have a compelling reason to add too, nor I want to sell. So the 20 position swell into 30-40 positions. Beyond that level, I probably start to clean up and consolidate, especially in tax deferred accounts.
As far as Buffet is concerned, he was not a pure Graham like value investor. He was more an activist or even control investor and he was concentrated, so that he could make sure he could influence the outcome in a substantial manner, or where he had superior knowledge (in some cases knowledge that would be considered insider knowledge nowadays). that was a very different approach than Graham/Dodd. the latter were basically buying a fairly diversified mix of stocks which appeared undervalued , without studying the individual companies all that much.
Well that's just me - 10 position is a very low number, because I found that I have ideas in areas that are often correlated. This means that probably 30% of my position and funds are bet on a single idea or trend, so the diversification is not as great as it seems. I basically take some insurance out on company specific risk but overall market trends can still have a significant impact on portfolio performance. |
