What are your thoughts about diversification of Investments? While for Harry Markowitz is the only free lunch in investing, Warren and Munger have other thoughts!
This video reports a few extracts from past Berkshire Hathaway Annual Meeting where Warren and Munger had famously discussed the case against diversification.
Those speeches and quotes became famous and popular, but also highly misunderstood.
In particular, Warren has consistently suggested the average investor/the retail investor/the know-nothing investor to invest using index funds, relying on broad diversification.
His attacks on diversification are related to the category of professional investors that are unable to stock-pick and therefore promote a big basket of securities (30-40-60, etc.).
STAMPS
00:10 Intro
00:30 The case of LTCM
01:28 Charlie's take on the real secret of investing
02:04 Warren's view on the "no-nothing investor"
02:30 Warren's quote: diversification is a protection against ignorance"
04:20 Three wonderful businesses are more than enough to do well
05:20 Three competitive businesses are less risky than 100 average businesses
06:12 Charlie's quote: much of what is taught in modern finance courses is twaddle
06:40 On Modern Portfolio Theory
Notes:
- The original video interviews have been edited in the interest of time and coherence.
- Credits: Berkshire Hathaway Annual Conference meeting.
#diversification #diworsification #investing
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