Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (41194)	1/26/2011 7:37:39 PM
From: nikkei86	Read Replies (4) \| Respond to of 78597

I view it from a complexity standpoint. How much do you really know about each of the 200+ stocks in your portfolio? I think extreme diversification is just a safeguard against enormous knowledge gaps. Plus, how many percentage points are you going to beat the market by? I've seen these so-called gurus with 200+ in their portfolios, and they only manage to beat the market by 1% or 2%. God knows there are others who underperform, too. When you get to 200+ your beta has to be pretty close to 1. I do understand, however, that the strategy is most likely better than an index strategy. But it's far from a value strategy. You'll never see the effect of a 10-bagger on your portfolio. "How the Hell can anyone say they are diversified when they have only ten stocks in their portfolio?" Well, call 10 stocks what you want, but I think it's the only way to see some serious returns. You're not going to get 15% over the Dow with 200+ in the portfolio. In general, I think people are eager to play the markets, so they load up on marginal situations. "the issue is that one never really knows what one's best ideas are except in retrospect" But how does this statement fit into value investing? You invest because you have a strong belief in the prospects for the company. Because you've done the homework. When I saw the iPod come out, I knew Apple stood a awesome chance of appreciating. There aren't many Apple plays, but I think that's the point. Load up on the few great plays. It's one of the basic principles of Munger. "people don't diversify enough by time" I'm not sure I understand completely. You always want to invest at the right time. The point is to invest in companies that will throw off tons of cash; companies that are strong buys. When you foresee that trend changing, then it's time to get out. But I would never invest in stocks that aren't buys or sells yet. If you knew about the iPod and Apple in 2003, would you have stuck only .0000000000000000000005% in the company? What's the point? You load up with a stock like that.