Portfolio Concentration – Sleep With One Eye Open

reminiscences of a stock operator pdf

portfolio concentrationhttp://www.valueinstitute.org

Value investing can appear to be quite easy: thoroughly analyse a business and its risks and then ensure the price paid offers an adequate margin of safety. Many advocates postulate that because the analysis has been thorough and a margin of safety has been incorporated, intelligent investors can then concentrate their capital in their best ideas (“Why invest in your sixteenth best idea?”). However we highlight reasons why even seemingly-diligent analysts can make poor investment decisions that could prove catastrophic in a concentrated portfolio.

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Portfolio Concentration – Sleep With One Eye Open

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1 Comment on "Portfolio Concentration – Sleep With One Eye Open"

  1. Ken Faulkenberry | Apr 20, 2011, 2:32 pm at 2:32 pm |

    Thank you Jacob for pointing out the importance of diversification. I do believe that the kind of diversification you get in most mutual funds (and certainly in owning multiple broad based mutual funds) is over diversification. This kind of investing is one of the reasons investors have done so poorly the past decade. Nevertheless, under diversification is even more dangerous. Finding the right amount of diversification is one of the most important concept in investing!

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