 |
|
Diversification Is For Amateurs
05-28-2008, 10:04 AM
|
#1
|
|
Recycles dryer sheets
Join Date: Mar 2008
Location: Washington, DC
Posts: 75
|
The latest (and last) Sophisticated Investor column from MarketWatch lists the five money management tips we can learn from the wealthy.
Number 2 is especially interesting.
 Quote:
|
2) Investing: Long-term growth may be the road to success, but you have to take risk to get rich. No guts, no blue chips, as they say. Concentrated, thoroughly researched positions will make you rich. Diversification, as money manager Marty Whitman -- a hall of fame investor in my mind -- says, "diversification is for amateurs."
|
|
|
|
|
05-28-2008, 10:15 AM
|
#2
|
|
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 10,802
|
Diversification is for people who don't want to wake up some morning suddenly needing a job.
As for MJ Whitman, take a look at his 3rd Avenue Fund. Maybe he is an amateur, because this fund is widely diversified- though not like an index.
Ha
__________________
Above all, humans are political animals.
Nota bene: I am either a moron or an idiot. So don't pay any attention to anything I say or you are one too. Please consult your financial advisor, astrologer or proctologist for whatever it may be that you are seeking.
|
|
|
|
|
05-28-2008, 10:15 AM
|
#3
|
|
Moderator
Join Date: Jan 2007
Location: New Orleans
Posts: 10,410
|
"Diversification is for amateurs"?
Uh huh... 
After all, why spread risk when you can HAVE IT ALL! 
__________________
"Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harborless immensities." - - H. Melville, 1851
|
|
|
|
05-28-2008, 11:20 PM
|
#4
|
|
Full time employment: Posting here.
Join Date: Jun 2007
Posts: 542
|
"Diversification is for amateurs".
And Marty's point is ........? :confused:
__________________
Pigs get fat, hogs get slaughtered. That's my story and I am sticking to it.
|
|
|
|
|
05-29-2008, 01:44 AM
|
#5
|
|
Dryer sheet aficionado
Join Date: Feb 2008
Posts: 25
|
Well, if the definition of amateur is someone who doesn't get paid for what they do, then he's probably right. I'd be more willing to take risks if I was being paid a lot to do it  .
Any idea what kind of compensation scheme these fund managers get? Do they make more when their fund does well?
|
|
|
|
|
05-29-2008, 07:22 AM
|
#6
|
|
Thinks s/he gets paid by the post
Join Date: Apr 2007
Posts: 1,119
|
Quote:
Originally Posted by DroopyDog
Any idea what kind of compensation scheme these fund managers get? Do they make more when their fund does well?
|
See generally Michael Edesess, The Big Investment Lie (2007).
__________________
"There is no more dreadful punishment than futile and hopeless labour" - Albert Camus
"Why should I let the toad work squat on my life? Can't I use my wit as a pitchfork and drive the brute off?" - Philip Larkin
|
|
|
|
|
05-29-2008, 08:05 AM
|
#7
|
|
Administrator
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 16,499
|
Quote:
Originally Posted by DroopyDog
I'd be more willing to take risks if I was being paid a lot to do it . |
Especially if I was risking someone else's money...
__________________
Numbers is hard...
|
|
|
|
|
05-29-2008, 05:53 PM
|
#8
|
|
Thinks s/he gets paid by the post
Join Date: Feb 2007
Posts: 3,052
|
__________________
Planned FIRE Summer 2011
Disclaimer: I make no warranty or guarantee about the accuracy or completeness of this information. I am not a financial planner, my comments only represent my opinion.
|
|
|
|
|
05-29-2008, 11:08 PM
|
#9
|
|
Thinks s/he gets paid by the post
Join Date: Dec 2004
Location: Minneapolis
Posts: 2,875
|
__________________
May we live in peace and harmony and be free from all human sufferings.
|
|
|
|
|
05-28-2008, 10:15 AM
|
#10
|
|
Thinks s/he gets paid by the post
Join Date: Jan 2008
Posts: 2,020
|
Well, I'm an amateur so I'll stay diversified.
I'd agree that a concentrated position is the only sure path to quick riches or quickly losing it all.... be sure it's all in naked puts as well. No sense saying you're going to go big and then not following through ;-)
|
|
|
|
|
05-28-2008, 10:28 AM
|
#11
|
|
Recycles dryer sheets
Join Date: Mar 2008
Location: Washington, DC
Posts: 75
|
Appropriate that it's his last column. If he really encourages Joe Schmoe to put all his money into "the next big thing" and not diversify, he shouldn't be writing an investment advice column!
I just thought the board would get a kick out of his ideas.
|
|
|
|
|
05-28-2008, 10:43 AM
|
#12
|
|
Recycles dryer sheets
Join Date: Jun 2005
Posts: 284
|
Put it all in Enron and grow to a fortune !
|
|
|
|
|
05-28-2008, 10:47 AM
|
#13
|
|
Thinks s/he gets paid by the post
Join Date: Feb 2004
Posts: 3,146
|
Frankly, in this situation, it is a complement to be an amateur. Amateurs are too busy with the important things in life and know, statistically, a diversified equity portfolio provides more wealth than one managed in this fashion. Just like poker players, a few can do quite well over the years but most loose it all.
__________________
Duck bjorn.
|
|
|
|
|
05-28-2008, 11:15 AM
|
#14
|
|
Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 3,897
|
i don't care about being rich, but i don't mind not being poor.
__________________
"off with their heads"~~dr. joseph-ignace guillotin
"life should begin with age and its privileges and accumulations, and end with youth and its capacity to splendidly enjoy such advantages."~~mark twain - letter to edward kimmitt 1901
|
|
|
|
|
05-28-2008, 11:38 AM
|
#15
|
|
Thinks s/he gets paid by the post
Join Date: Apr 2007
Posts: 1,119
|
The problem with tip number 2 is not that it's wrong, but that it assumes the majority of investors want to be "rich". Most of us on this board just want enough to be financially independent.
I guess a high-rolling hedge fund manager would be the epitome of a 'professional' investor. They certainly take big gambles on concentrated positions. But they are playing with other people's money, and have a built-in compensation incentive to speculate
FWIW, Warren Buffett certainly prefers a focused portfolio, but has repeatedly recommended that "know-nothing" (i.e., the vast majority of) investors stick to low-cost, diversified index funds.
I like his tip number 3:
Quote:
|
Lifestyle. They may seem fancy, but just because homes and vacations are expensive doesn't mean they are better. The magic of all things wears off after a while. Buy a new sports car and after a month I'll bet you will find something to complain about. Being smart about how you live trumps ostentation and shows you have class. Go to old-moneyed Greenwich, Conn. and you'll find the richest people driving the most broken-down looking cars. Think smart; don't show off.
|
__________________
"There is no more dreadful punishment than futile and hopeless labour" - Albert Camus
"Why should I let the toad work squat on my life? Can't I use my wit as a pitchfork and drive the brute off?" - Philip Larkin
|
|
|
|
|
05-28-2008, 11:17 AM
|
#16
|
|
Thinks s/he gets paid by the post
Join Date: Jan 2008
Posts: 2,020
|
In one sense, the article is spot-on. If you start a business, you don't diversify into starting a hundred small businesses, you pour yourself into that one. If it hits, ala Google or Microsoft, then that's the fastest way to wealth. If it doesn't, well, there's always the next idea.
|
|
|
|
|
05-28-2008, 11:25 AM
|
#17
|
|
Moderator Emeritus
Join Date: Feb 2006
Location: Tampa
Posts: 6,900
|
At age 59 and counting, I figure I just want my fair share.
I'll stick with diversification.
__________________
Rich
Tampa, FL (32.9% of the way to ESR. Really. I mean it. Seriously. )
As if you didn't know..If the above message happens to contain medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any medical purpose whatsoever. Consult your own doctor for all medical advice.
|
|
|
|
|
05-28-2008, 04:03 PM
|
#18
|
|
Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 3,141
|
Warren Buffet said something like that but made clear that 99.999% of us are amateurs and belong in indexes. I think he would include most managed fund managers among the amateurs.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
|
|
|
|
|
05-28-2008, 04:46 PM
|
#19
|
|
Full time employment: Posting here.
Join Date: May 2006
Posts: 672
|
That article shows why the Sophisticated Investor column should disappear.
|
|
|
|
|
05-28-2008, 05:01 PM
|
#20
|
|
Thinks s/he gets paid by the post
Join Date: Feb 2007
Posts: 3,052
|
I am an amateur. I use it, and am proud of it... also very well off financially.
__________________
Planned FIRE Summer 2011
Disclaimer: I make no warranty or guarantee about the accuracy or completeness of this information. I am not a financial planner, my comments only represent my opinion.
|
|
|
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
|
| Thread Tools |
Search this Thread |
|
|
|
| Display Modes |
 Hybrid Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
