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

To: Paul Senior who wrote (2450)	11/15/1997 3:43:00 AM
From: Michael Burry	Read Replies (2) \| Respond to of 78625

Paul, While holding a diversified portfolio might protect against loss, it limits one's ability to beat the market. In his book Investment Psychology Explained, Martin Pring points out that diversifying to only eight stocks takes about 90% of the situational risk from a portfolio, and further diversification limits the ability to produce superior returns at the same time you are increasing exposure to market risks. I'd have to go with Carnegie's advice to "put all your eggs in one basket and watch it very closely." I think the big lesson from Buffett is that the advantage individual investors have over institutions and the S&P is that they can wait for the very best. The other major advantage for individuals is they can hold indefinitely while not having to report to anyone. Most individuals trade on a whim and frequently, thereby negating their natural advantages and guaranteeing the majority will always be wrong. Of course, I'm still only striving to follow this seemingly simple advice, which indicates how against human nature it is, and how those that can buy well and hold long are accomplishing something few can. For this, they deserve extra returns. Good Investing, Mike

To: Paul Senior who wrote (2450)	11/15/1997 5:29:00 AM
From: John Langston	Read Replies (1) \| Respond to of 78625

Paul: My understanding is that Buffet adheres to an antidiversification philosophy, which of course is completely different than Graham. I think his "other" holdings can be explained as arbitrage plays. He probably only pulls out the big bucks for his long-term holdings. John

To: Paul Senior who wrote (2450)	11/15/1997 9:12:00 PM
From: Proud_Infidel	Respond to of 78625

Buffet is an antidiversificationist, at least to a point. Here is a quote attributed to him. I wrote it down, although I cannot recall exactly where I read it. "Diversification is protection against ignorance. It is not necessary for those who know what they are doing." -WB Regards, Brian