Diversification won't make you rich — Invest like a legend instead

Is it time to reevaluate the role of diversification in your portfolio?

Jan 29, 2025 - 22:30

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From Wall Avenue to Main Avenue, diversification has prolonged been the secret when it involves achieving prolonged-duration of time success, but it be no longer basically top-of-the-line recreation on the city.

TheStreet Pro contributor and prolonged-time investor and vendor James "RevShark" DePorre broke down his technique that attracts on the strengths of giants together with Warren Buffett and George Soros.

Catch extra from DePorre and our other consultants right here.

Transcript:

JAMES DEPORRE: That one conception that all of these great investors share is that they attain no longer overly diversify. As soon as they've a first rate conception, they trail in big. They undoubtedly try and press the affirm when they've an revenue. Buffett, and O'Neil, and all those others explain that diversification is completely an excuse for lack of know-how, that you undoubtedly have to clutch your stocks so that you may in actuality feel satisfied that you may elevate an outsized space.

You do no longer prepare risk by honest looking out for a lot of stocks. You prepare risk by in actuality interesting your stocks. And all of the greats have that identical technique, all individuals. Soros, Munger, and a lot of others, all of them explain the identical thing about trail big whenever you are going to have an revenue.

JASON MESHNICK: Can I seek files from you about that? Because I salvage that is a extremely good topic. And I do know that Louis, which we will discover to you in a minute, has written a lot about space sizing. And I do know in TheStreet Pro portfolio form of the everyday space size is somewhere around 3%. There is around 30 stocks within the portfolio.

How attain you recognize, Rev, a neighborhood is too big? Admire how attain you press the scale? You may have talked furthermore about purchasing and selling around a neighborhood too. How attain you to make a decision how many shares to have of something?

JAMES DEPORRE: Effectively, I in total am very incremental within the system that I make investments. I design no longer only design a single aquire and a single sale. I will beginning up off with a small space. After which I will beginning up ramping it up or simply watching it or no topic, relying.

The closing size-- neatly, the system I take into fable it is miles that I diversify by time physique moderately than by security. I'm purchasing and selling the identical stocks in quite a lot of time frames. In say that's what protects my-- that's what manages my risk. If I'm most effective maintaining a stock for a few days, then my risk is famous decrease than it would possibly per chance be if I'm honest maintaining one big space over a extremely prolonged time-frame.

So my space size can differ from a few hundred shares to several 1,000 shares very like a flash. And that is the explanation how I prepare the risk. And it in actuality goes abet to something that George Soros talked about. And I salvage right here's in actuality the most foremost to all investing. And that is that it be no longer whether you are correct or imperfect, it be how famous money you design whenever you are correct and the map in which famous you lose whenever you are imperfect.

So in other phrases, whenever you undoubtedly feel you are correct, you purchased to press and be aggressive, per chance commerce extra within the brief duration of time. And whenever you are imperfect, then you discover out of the system like a flash and test out to diminish that loss as famous as that you may imagine.