Diversification and Balanced Investments

wombat42_2

Here is a controversial opinion for you:

"Diversification is a scam. "Diversification is something that stock brokers came up with to protect themselves, so they wouldn't get sued [for making bad investment choices for clients]. Henry Ford never diversified, Bill Gates didn't diversify. The way to get rich is to put your eggs in one basket, but watch that basket very carefully. And make sure you have the right basket. You can go broke diversifying. Ask anyone who's diversified in the last three years. They've lost money."

http://www.businessinsider.com/jim-rogers-diversification-is-a-scam-2009-4

jon3001

pooter wrote: »

Not sure that scam is the right word but certainly used by stockbrokers and all financial advisors to cover up that they really don't know what to invest in.

A stockbroker's job is to buy and sell your stocks. Not tell you which ones to buy or sell.

The financial advisor's job is to provide financial planning services. Not predict how individual investment will perform.

wombat42_2

pooter wrote: »

Not sure that scam is the right word but certainly used by stockbrokers and all financial advisors to cover up that they really don't know what to invest in. Why should they? If they really could pick winners they'd use their own money, not yours. So instead they tell you that the best way is to put money on every horse in the race.

That bit about the eggs in baskets isn't his, btw, he's pinched it from Andrew Carnegie who said it a century ago.

Like stockbrokers, if he was as good at investing as he pretends he wouldn't have to write books.

Yes i think there is an element of truth in this that you are unlikely to blame your IFA or whoever if he does a diversified portfolio for you. I have a non-diversified portfolio, I have commodites, commodity stocks and cash and nothing else and i feel fairly comfortable. But as Rogers says, dont invest in what you dont understand.

Rogers is already mega rich and has a long track record of investing success, although that obviously doesnt mean he is always right.
http://en.wikipedia.org/wiki/Jim_Rogers

Sales of his books would only pay a tiny fraction of the income he gets and has got from investing.