A diversified investment is not always the right investment strategy? | Hear from Buffett, Soros and five other famous investors
I am not an investment guru, so before you jump to conclusions, let’s here from people who have actually built up a huge investment portfolio.
Five well-known investors like Warren Buffett, George Soros and Carl Icahn often talk about how to select stocks for investment and it have some surprising insights.
1. Diversified investment is not always right
While many prominent investors recommend diversification investment, Buffett says “diversified investment is for investment amateurs”.
A skilled investor concentrates on the bland chosen by himself from a long-term perspective. That is pretty much Buffett’s investment style.
One of the advantages of diversified investment is to mitigate the risk, but if you increase the number of bland, it will only increase the time you spend monitoring your investment, and it becomes difficult to manage.
Be patient and play in quality rather than quantity, “When the gold comes down, accept it with a bucket” (Business Insider article dated November 6, 2017).
2. Invest only in the fields you understand
Until recently, Buffett was famous for avoiding the IT industry, “Do not speculate in what I do not understand”.
It is said that Buffett’s way how to choose bland is “how do the company profit, can I understand the main factors affecting the industry within 10 minutes?”
If Ｉ can understand it within 10 minutes, consider buying the stock.
And do not dabble in it, if Ｉ cannot understand it.
It is impossible to predict the future 100% correctly.
If I do not understand my investment, and I rely on the accuracy of the forecast, it would be best to avoid it.
3. Learn from failure and move forward
Even great investors like Buffett undergo a lot of bitter experiences.
As a recent example, we know what happened with Variant Pharmaceuticals International stocks and IBM stocks.
However, Buffett is not discouraged by failure, instead, he but turns failure into an opportunity to learn by “analyzing the cause of failure and writing it down so as not to make the same mistake again”.
This is applies not only to investment but also to every aspect of your life.
4. Find a broker that matches your investment style.
While you may tend to overlook this, your investment cannot be done on your own. You will always need a broker.
Soros – a great investor equal to Buffett – is quoted saying “Finding brokers that fit the style of my investment” is indispensable for good investment.
If you meet a broker whom you feel good about, then the relation between the two is not just that of a customer and a broker, “to go out with each other”.
This good relationship will lead to a greater investment effect (from Capital Investor).
Although it is impossible to apply it directly to online transactions, the idea of having trustworthy traders still applies.
5. Benefit from fun investment, good investment is boring
If you feel that “Investment is fun” according to Soros saying, it is “evidence that the investment is probably is not profitable.”
Truly good investment is “boring and it has the weak humanity”, with rationality and discipline.
6. The biggest opportunity lurks in unexpected circumstances
Despite the fact that market fluctuations cannot be predicted, many investors are interested only in “stocks that are likely to be profitable”.
That’s why Soros is convinced that the biggest opportunity lurks in “unexpected circumstances”.
What is important is “to prepare to cope with all situations”.
By coping calmly, you will get maximum results (from Capital Investor).
7. Even if you are making a large profit, you need to know when to quit watch the time to quit.
In 2015, Carl Icahn sold all of the Netflix stock he owned for the equivalent of 2 billion US dollars.
“It needs to be converted to cash quickly when it hits a return of 457% in a little over a year,” he said, adding that the closing is the key to winning a good trade.
Although Icahn takes a different name of “takeover shop”, his greedy investment style will only be established with exceptional cleanliness (the article on July 16, 2015 Investment News).
8. Review issues already held
When Peter Lynch, the “God of investment”, was asked how to choose a profitable stock, he replied, “If the manager of that company starts buying his company’s own stock , the stock price will rise sharply.”
However, there is no need to always search for new stocks at all times, he warns.
A good company cannot easily be found so easily.
Many of the stocks of Magellan Fund which Lynch invested in, started from the purchase of a small stake.
If you think so, “there is a possibility that stocks already possessed may be the best stocks for you.”
In that case it may be a better choice to buy stocks on hand rather than to purchase new stocks (Ride 2 Rich article dated June 10, 2017).
9. You should not confused by trends
In recent years of technology investment heyday, Peter Tiel says “If you hear the words big data or cloud, run away but win”.
There is sense of incongruity in Tiel’s remarks, given that he is the initial investor of Facebook, one of the biggest technology companies in Silicon Valley.
However, Mr. Teale is not telling investors to avoid technology stocks, he is warning about
corporations that try to attract investors using “vogue words” such as big data, cloud computing, AI (artificial intelligence), Fintech, blockchain, and whose ability and business strategy are considered third rate.(Medium article dated July 3, 2015)
To summarize the advice of these great investors, it seems like investors need to focus on “quality over quantity”, “understand the stocks they invest in”, “not be affected by price fluctuations and trends”, and stay “positive in the case of losses” .
It sounds like common sense, but it can also be easily forgotten. So it would be good to review this advice again in future. again whether all items are cleared now.