Some people only have a handful, some people use funds to hold hundreds and hundreds. In this video, we will weigh up the opportunity cost of diversification against the advantages of spreading your bets.
0:00 – Intro
1:47 – The Birthday Paradox
4:19 – Downside to diversification
5:50 – Buying the haystack
6:53 – Allocate your capital according to your conviction
Some interesting links and further reading on the topic:
‘Some Studies of Variability of Returns on Investments in Common Stocks’ by Lawrence Fisher and James Lorie – https://www.jstor.org/stable/2352105
‘The Illusion of Diversification: The Myth of the 30 Stock Portfolio’ – https://www.investopedia.com/articles/stocks/11/illusion-of-diversification.asp
Оur Investing 101 series will cover the fundamentals of investing and will try to bring you the basics to build a solid foundation. Let us know in the comments about future topics you would like to see covered in these videos.
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As with all investments, your capital is at risk. Investments can rise and fall, and you may get back less than you invested.