[DesertCat]

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DC,

I have not read it personally, but the academic research I have read disagrees. Not to mention a good bit of the risk comes from increased exposure to business risk. If you have a major innovation or etc that crushes one of your 2 50% companies... You're effed. When you're young and with discretionary income and taking a shot, I don't mind this idea at all. Another bigger downside is the years spent recouping where you were originally from the misstep.


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This is true. But in my case I was very certain about those two companies. The Mark Twain quote is "put all your eggs in one basket and watch that basket!". Academics have trouble explaining how Buffett can beat the market at all, let alone by such a large margin and with low variance over a long period with such focused portfolio.

Both of my picks I felt offered very high returns, as well as they had a "margin of safety" provided by their assets and earning power. On one I paid about 3x earnings for example. So I felt my worse case scenario was losing about 20% of my portfolio which I could recover from, and that would happen very infrequently. And I monitored these companies extremely closely.

Once again, that level of risk is foolhardy unless you have some real evidence that you understand how to value a company and assess it's business risks. I'm not arguing the average joe should focus their portfolio, in fact I'll repeat that almost everyone should just buy an index fund.