John Neff said ‘by playing it safe, you can make a portfolio so pablum-like that you don’t get any sizzle. You can diversify yourself into mediocrity.’
You do not have to hold shares in every sector of the economy; merely a reasonable spread, staying within your circle of competence and in areas of the market where there is evidence of undervaluation.
It is stupid to own, for instance, turbine companies if the market is over-excited about this sector.
A dozen or so companies is usually sufficient to provide the private investor with enough diversification. A mutual fund, such as the one I’ll be running next year, needs to be more diversified to be able to withstand a flood of client redemptions at a time of market turbulence to avoid too much dependence on rapid liquidation from a mere handful of stocks; but still I expect to have only around 20-25 companies.
I'm a full-time investor running my portfolio. I invest other people's money into the same shares I hold under the Managed Portfolio Service at Henry Spain. Each of my client's individual accounts is invested in roughly the same proportions as my "Model Portfolio" for which we charge 1.2% + VAT per year. If you would like to join us contact Jackie.Tran@henryspain.co.uk
investing is about making the right decisions, not many decisions.