Why Diversification Won’t Cut It

Last week, I showed you how it can pay to go “all in” on a massive trend like the rise of the internet.

But I still field questions from many readers wondering if it’s a good idea to concentrate your wealth in one area. Isn’t that too risky, people often ask, and shouldn’t sensible planning involve diversifying your portfolio, so you don’t put all your eggs in one basket?

That brings me to today’s topic, which I’ll begin by asking a question: How many people have gotten rich from an index fund?

The answer: not many.

My point is that with an index fund or other diversified investments, it’s true… you are safer. But at what cost?

You sacrifice the opportunity for big gains and end up only earning 7% or 8% a year. That’s not enough for someone at or near retirement.

Now, brokers and money managers often preach the virtues of diversification.

You see, most financial advisers get paid based on how much money they manage for you, not on returns. So their focus isn’t on generating big returns on your money.

Instead, their focus is on making sure your money stays at the firm, so they can generate big fees on it.

The best way to do that is to issue bland advice that can’t possibly be viewed as unconventional or outside the norm. Nothing that would scare off the customer or make them feel like they are doing something different than their friends.

The mainstream financial advice is to diversify like crazy, to spread your money across bonds, stocks, and real estate, and across many different companies and funds.

Hey, at least it prevents inexperienced investors from putting all of their money into one terrible investment.

But here’s what some of the investing greats have said about the idea…

Warren Buffett famously said “diversification is protection against ignorance,” and that “it makes little sense for those who know what they’re doing.” At one time in the past, Buffett even allocated more than 40% of his portfolio to only one stock.

Stanley Druckenmiller, one of the greatest hedge fund managers of all time, who managed over $12 billion in assets, said: “I think diversification and all the stuff they’re teaching at business school today is probably the most misguided concept anywhere.”

He’s also famous for saying when you see something in the market that really excites you, “bet the ranch on it.”

Look, diversifying your portfolio can work for some folks. But let’s face it, nobody ever got truly rich by diversifying their investments.

When you study American history, you see that most rich, self-made billionaires made their money by going all-in on one business or on one huge revolution.

Think Bill Gates, Jeff Bezos or John Rockefeller.

These folks and many others got truly rich by spotting one giant opportunity and betting big on it.

And while mainstream financial advisers don’t like to advertise this, investors typically see one or two giant financial opportunities every decade.

That’s exactly what my Big Bet Summit is all about.

The bottom line is that if you make a big, smart bet, like the one I want to show you tomorrow, January 11, at 4 p.m. ET, that’s what can be a game changer for your financial life. Click here now to reserve your spot before tomorrow’s event!



Louis Navellier 

The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

More Louis Navellier



RSS Feed

Little Book

InvestorPlace Network