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.
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Prof. Glen Arnold
I'm a full-time investor running my portfolio from peaceful Leicestershire countryside. I also happen to be UK´s best selling investment book author and a Financial Times Best selling author. Originally, I wrote all my ideas out in full on this website. Now that ADVFN publish them they are entitled to display the full version for six months – you can see them here. Thus can I only post the first few paragraphs here for anything younger than six months.
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