“The only investors who shouldn't diversify are those who are right 100% of the time ..... Maybe a few others."
Well, not even Charlie Munger's business partner of several decades, Warren Buffett, would claim that he's "right 100% of the time".
HOWEVER, Buffett is the 7th RICHEST MAN in the world with wealth created solely from his stock market investments and purchase of companies. So it seems that he must know what he's doing "in that department".
So if one had to follow his company analysis strategy then it's less likely that one may need to invest in the "100 stocks" aspect that Charlie Munger refers to .....
Buffet's current stock portfolio has 47 companies in it with ~50% (24 no.) are less than 0.5% of that portfolio.
So for someone who's portfolio is worth about $270 BILLION, I would not have thought that's a large number of stocks to invest in, bearing in mind that with such a large amount of investing capital he will face "constraints" such as the number of shares available, etc... .
Like Munger, Buffett encourages smaller investors to invest in, say, 5 to 10 good companies and put more of your investing capital in them. "Why", he asks, "put money into your 20th best choice rather than in your top 5 or 10 ?" (See Chap.8, "How Buffett Does It" by James Pardoe).
Needless to say, when the monitored financial performance of those companies start to move "in the wrong direction" that would be a time to sell and buy something else.
And, IMO and experience, if one bases one's stock choices on Buffett's criteria, and there is a general fall off in the market as a whole, and the reason(s) for that fall off were not part of one's stock's "business model", i.e. "Subprime Mortgage Crisis", "COVID1-19 Discovery", etc, then it is those "Buffett-type" stocks that are usually the ones to recover early on because they are then perceived to be "cheap" in that declined market ... e.g. AMAT, TXN, DIS, UNP, TER, etc.... |
