Why everyone needs to diversify and why I don't like to diversify.
Diversifying sucks.
Like I mean, I really don't care to look up how one company is doing after I've bought stocks in it, why would I want to know how ten companies are doing?
Furthermore if I diversify into many different skills then someone will have passed me by on the most important skills.
But I want to think about diversifying when buying individual stocks.
I was watching Warren Buffet give a speech on YouTube.
He talked about how five to seven stocks are enough for diversification. But then something amazing happens, the guy starts talking about how he missed out on the opportunity to buy Fannie Mae.
I just pulled up Yahoo finance, FNMA is trading at like 2.06 USD. For all intents and purposes it does not look like it would have been a great investment to buy and hold for a lifetime.
Yet here is the Oracle of Omaha, regretting his decision not to purchase Fannie Mae.
Another video on Youtube is Peter Lynch introducing people to stock market investing.
The guy mentions that stock prices can and do go down by 50% or more. You can increase your returns if you wait for the price of a great business like Fannie Mae to go down by 50% before purchasing shares.
It is just mind blowing.
Even the greats would have gotten it wrong.
I don't like to diversify because I don't care to do the work. But am I arrogant enough to think that I would have picked the Coca Cola over the Fannie Mae? No, I'm not.
Diversification is our friend, to protect us from losing everything in one horrific accident. Some people may make a lot of money and are able to make up a financial loss. However since I earn near minimum wage it is incredibly important that I diversify. I can't just "make up a loss."
What do you think? Does the wipe out risk protection gained by diversifying more than offset the advantage of deep expertise gained by putting all your eggs in one basket?
Like I mean, I really don't care to look up how one company is doing after I've bought stocks in it, why would I want to know how ten companies are doing?
Furthermore if I diversify into many different skills then someone will have passed me by on the most important skills.
But I want to think about diversifying when buying individual stocks.
I was watching Warren Buffet give a speech on YouTube.
He talked about how five to seven stocks are enough for diversification. But then something amazing happens, the guy starts talking about how he missed out on the opportunity to buy Fannie Mae.
I just pulled up Yahoo finance, FNMA is trading at like 2.06 USD. For all intents and purposes it does not look like it would have been a great investment to buy and hold for a lifetime.
Yet here is the Oracle of Omaha, regretting his decision not to purchase Fannie Mae.
Another video on Youtube is Peter Lynch introducing people to stock market investing.
The guy mentions that stock prices can and do go down by 50% or more. You can increase your returns if you wait for the price of a great business like Fannie Mae to go down by 50% before purchasing shares.
It is just mind blowing.
Even the greats would have gotten it wrong.
I don't like to diversify because I don't care to do the work. But am I arrogant enough to think that I would have picked the Coca Cola over the Fannie Mae? No, I'm not.
Diversification is our friend, to protect us from losing everything in one horrific accident. Some people may make a lot of money and are able to make up a financial loss. However since I earn near minimum wage it is incredibly important that I diversify. I can't just "make up a loss."
What do you think? Does the wipe out risk protection gained by diversifying more than offset the advantage of deep expertise gained by putting all your eggs in one basket?
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