Rule Du Jour: Rule #42 Diworsification (Patreon)

Every day I get people coming to me, asking me what I think of a certain investments, and I benchmark everything against my models. And I often nearly all the time cannot come up with better investments, for example people are always asking about fringe AI investments versus Tesla or Nvidia. Or someone said AVAX is killing it vs Sol.... nope. They are simply too risky. I often feel bad telling them something is bad as they have no moat, poor financials, heavy SBC, no growth, no FCF etc but it is the truth.

Warren Buffett once said "Diversification is protection against ignorance. It makes little sense if you know what you are doing"

Hence I tend to be very focused in very few assets - remember to always balance risk and reward. Currently right now I am exactly 95% invested in 4 assets - MSTR TSLA SOL and BTC in that order.... why? Well they are all winners and I have spent YEARS researching them all every day.

The Rationale Behind Concentrated Portfolios

For investors who possess deep knowledge and understanding of specific businesses or sectors, concentration can yield better results. Holding a small number of extremely well-researched, high-quality investments is far more profitable and less risky than owning a large, diverse portfolio of lesser-known companies. In addition, I am a strange cat, as you will almost never find someone with a portfolio make up like mine. I start with future narratives and work backwards. It is that simple.

"Diworsification"

Returns are diluted by including too many mediocre investments alongside the best ideas. If I fill my bag with less high performers they suck capital that could have otherwise been invested in said high performers.

Community Mistakes I see

Now another thiing I see - is folks get desperate and they see me take a 0.1% flutter on something and they go all in... that is bad. This is the reason I share my portfolio allocations not once but twice every week to remind people if the risk I am taking... rem I am 95% in 4 items.

Risk

Now there is risk, imagine you pick the wrong 4 assets, well then you are toast.... this is why I spent every waken hour assuring my thesis remains valid and invest heavily in models to ensure the data backed thesis remains valid.