hey azanon,
Well, we can all believe whatever we want to believe.
The problem with the concentrated portfolio method is that there is a much greater chance of getting poor (and getting rich OTOH) than being as diversified as possible. I'm concerned that people think of investing as a game of winning, when most people should be playing the game of trying not to lose.
It seems to mee that the people that are always spouting the "15 stocks is all you need for diversification" are also usually the same people that spout the "only stocks provide inflation protection" and "stocks return 10% a year".
Stocks have provided superior returns in only a couple of time periods. In the 1800's, stocks and long term bonds provided about the same real return. In the 1900's up until the early 1980's stocks did have a higher real return than long term bonds - something like 5% or so more. Post 1980's, stocks and long term bonds have had about the same real return.
Here's an interest article by Robert Arnott and Peter Bernstein,
What Risk Premium Is "Normal"?
Stocks do not have any inherent inflation protection. Only TIPS do. Stocks have not done well in times of relatively high inflation. Stocks are not positively correlated w/ inflation.
Stocks
have provided high returns and inflation protection, but does that mean that they "will" continue to do so?
Still, regardless the route you go on that, its a far less critical decision than simply deciding to save a lot and save often. That's the real key to ER, i think. Not whether you chose index over active management.
I couldn't agree more.
- Alec