[DesertCat]

Do you guys get together and conspire to put up threads like this just to jerk my chain and get me foaming at the mouth? Ok, for the last time

1) Beta isn't risk for a long term investor. True risk is business risk. Your risk isn't how often the stock flunctuates, it's whether it's another Enron, or whether it's business will go bad.

2) If you know how to value companies well, and you are a long term investor, diversification will not only hurt your results, it will create more risk than it solves. Essentially Buffett will tell you it's better to own fewer companies that you can know well, than too many stocks to know any deeply.

3) As proof of this, look at Buffett's results. Not only has he beaten the market by over 2x for a very long time, he actually has only one down year in 50. He's done this by running a very concentrated portfolio for most of his career.

Now that I've said all that, I still don't recommend individual stock picking to most people. It's not the amount of time you spend, Buffett could spend ten hours a month and still crush the market (with the right size portfolio). But he's a freak in terms of capabilities (50 years of reading thousands of annual reports, photographic memory, perfect disposition for the job).

The first problem is that most people don't understand how to value companies. Even for those that do, most don't have the psychological temperament to commit to buying cheap and selling dear. The ability to wake up one morning and see your biggest position down 35% and immediately think about buying more instead of running for the exits. The ability to ignore "price trends". To focus on what you know and ignore what you can't predict. And utter patience to wait with all your money in cash when you can't find anything attractive and keep yourself from buying something that looks sortof cheap just to do something.

Most people trade too much, they can't even hold an index fund for the long term. They'd be better off accepting "average" results from holding a single index fund forever because instead they buy and sell hot funds and stocks and sectors and trade until their results are way worse than that "average return" index fund produces.