Comments on: Don’t Diversify

By: Business Lesson 1 Pigs Get Fat Hogs Get Slaughtered

Business Lesson 1 Pigs Get Fat Hogs Get Slaughtered — Wed, 05 Aug 2009 04:45:28 +0000

[...] Concentrating on one business model will either make you filthy rich or get you slaughtered like a hog. I personally don’t need billions of dollars; I just need a few hundred million. [...]

By: Winning Solutions

Winning Solutions — Sun, 25 Jan 2009 17:41:55 +0000

Diversification is a must considered for any business at a level. Keeping money idle is the worst practice in business. When you see that some money in your investment budget is idle after touching all your areas in one business, you should definitely consider diversifying. But when there is a recession around, you need to think 4 or 5 times before taking a decision. You just got to be sure about your safety measures and should have a solid advisory team.

Andy,

Can you please explain a bit more about your 7th point? Am not getting it clear.

By: Sean

Sean — Sun, 25 Jan 2009 08:44:22 +0000

Agreed, most of the ultra successful people I personally know have made the vast majority of their wealth by hitting it big with a single business (with a combination of crazy hard work, smarts, brass balls and of course - good timing or luck as some people would say!). Only then did they start to invest some of their money outside of their business into other ventures like real estate (mostly undeveloped parcels of land). If you are really good at something and fall into the 1-2%, why would you invest outside of that core competency? Diversifying would be fool hardy. And in terms of risk, even if you were to go bankrupt in the worst case scenario, chances are you could use your skills and experience to be back on top with 3-5 years anyways.

By: HOBO(nickname)

HOBO(nickname) — Sun, 25 Jan 2009 08:26:42 +0000

I agree that diversification is important.
One should do what he is best in but other than that one has to do a business which is related to daily cash income. Restaurant is one fine example.

By: Ron Hekier

Ron Hekier — Sun, 25 Jan 2009 06:47:54 +0000

I am reminded of Peter Lynch, the famous former manager of the Fidelity Magellan Fund. He coined the term “diworseification.”
However there is a danger to ignoring expansion to a new field. One may end up with stagnation instead of diversification.

On a different note I highly agree with your advice to “give.” Providing aid and charity to others is more important when one is faced with uncertainty than when one’s financial outlook is rosy and stable.

Lastly your advice to document a 30, 60, and 90 day plan is invaluable. Studies have shown that those who write down their goals are far more successful than those that do not.

By: J

Sat, 24 Jan 2009 22:49:39 +0000

I am one of them who believe in concentrated efforts vs diversification. I think one of the main points that are often overlooked is that, how you play the game is not the problem, it’s what you do when you are playing the game.

You don’t just pick a few options that you *think* might make you money. Over the time so many people even forget to update themselves on things but it’s okay, because you think the risks/losses will be averaged out right? With just one option, you spend your time to research and know everything inside out. If there is a problem coming, you know and you get out before it hits you. The risks are not because of some unforeseen circumstances that drop out from the sky one day. The risks can be reduced by doing your homework. Many saw this recession coming. Most others were too busy doing something else and fantasizing about their investments.

Personally speaking, if one could thoroughly research and update themselves on everything, diversification wouldn’t be a problem at all. Just that time is always a limiting factor, and I would think that one would be better off just knowing one thing 120% than 12 things only at 10%.

By: Why I Drive a 13 Year Old Car and Other Wonderful Stories | steve-olson.com

Why I Drive a 13 Year Old Car and Other Wonderful Stories | steve-olson.com — Sat, 24 Jan 2009 04:49:51 +0000

[...] Diversification is a terrible way to create wealth - This is another one from Andy Liu. If you’re interested in money or business, you’ve got to subscribe to Andy’s blog. This is great stuff. [...]

By: Gert

Gert — Sat, 24 Jan 2009 00:31:59 +0000

I believe the problem is that there are tons of people with qualifications as diversified as you can possibly imagine. What is really hard to find sometimes is a person specialized in one or two areas that can just get the job done.

Diversification might be good at the beginning of your carreer, but after gaining some experience I think those who are experts in one or two fields will be far better off.

By: Johnny

Johnny — Fri, 23 Jan 2009 16:40:18 +0000

This is a very complex issue and there are so many ifs/ands/buts that a complete discussion would be lengthy (after all, using a index as a proxy for an asset class in an efficient frontier model would also be diversificaiton - anything other than a single bond or a single stock or a single VC investment, etc. would be diversification).

The closer you get to retirement age, the lower the amount of risk that should be in your portfolio. This means your portfolio strategy should change as your needs and time frame change. Hopefully those folks that were close to retirement before the stock crash were already allocating less to stocks than to other less risky assets.

For myself - who has min. 30 years before retirement, bring on the Microcap fund. I am putting 100% in the riskiest asset class available in my 401k. When I only have 15 years, I might adjust things a little, 10 or less years and things would be getting much more conservative. (not actual advice, not a advisor, just a guy with a keyboard

Same goes for startups - at this point I still have time for a lot of failures. If I were 55, I might spread it around a little. And just like in investing, there will be a more efficient mix of opportunities to put my time into.

By: Escalate Media

Escalate Media — Fri, 23 Jan 2009 14:38:49 +0000

another great post by you Andy… prior to reading this we had already started working on regaining our focus as we were going in 10 directions now we are going down several paths but only one at a time so we can focus on it and nail it.