Forum Topics Concentrated Funds
Remorhaz
Added 6 months ago

A topic our dear @Strawman opines on on the odd occasion (on MF podcast and elsewhere) - a recent article published on Firstlinks offers an interesting counterpoint to the oft quoted merit of having a concentrated portfolio rather than an over diversified one

Many investors, including Warren Buffett, are believers in concentrated portfolios. After all, if you don't have conviction in positions, what's the point? Joe Wiggins (Director of Research at UK wealth manager SJP, author of the book The Intelligent Fund Investor and publisher of investment insights through a behavioural science lens at www.behaviouralinvestment.com) has gone from being a fellow believer to a sceptic, and here he details why

The problem with concentrated funds


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Solvetheriddle
Added 6 months ago

@Remorhaz thanks interesting, the one thing that is missing in retail land commentary, i find, is context, and it differs greatly from person to person. re concentration, he hits on a point that i agree with and that is the small but possible chance of something totally unforecastable and unlucky happening. That's why i don't concentrate too much. if you did, say, have half of your net wealth in say, 5 stocks, (IMO heavy concentration) i would make sure they were as uncorrelated as possible to try and minimise that risk. --and of course, know everything possible about them.

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Strawman
Added 6 months ago

Some excellent points made there @Remorhaz

(Overconfidence really struck a chord in particular with me).

I guess it's a spectrum. I don't know where the right level is between one single investment, and a small piece of every investment, but for me somewhere around 10-20 feels about right - a level where you can have the potential of outsized returns without subjecting yourself to catastrophic failure.

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