The SilverBullet – 19 November 2014

“Wide diversification, which necessarily includes investment in mediocre businesses, only guarantees ordinary results” – Charlie Munger

We are regularly asked to explain the benefits of investing in a concentrated portfolio of 25-35 holdings versus a more diversified portfolio. Many people believe that further diversification lowers risk. We believe this is flawed thinking. Many equity managers that invest in a limited number of stocks based on high-conviction have a very strong track record. In this article, we share our thoughts on diversification and the reality behind statistics claiming the underperformance of active managers. We will show that there is no other conclusion: diversification really is diworsification.

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silvercrossAdmnThe SilverBullet – 19 November 2014