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Don't diversify (a brief rant on bad financial advice)

Some common advice out there is just plain wrong.

One example is "You need to broadly diversify!" Especially for younger investors.

In this video, I’ll explain why “diversify” might be terrible advice for you.

To build wealth, concentrate

I'm not talking about personal productivity. I'm talking about where you put your money.

How is the most wealth built in the stock market? By concentrating your money on a small number of individual stocks. Like 10-20.

Serious stock market wealth does NOT come from having a 'broadly diversified portfolio of non-correlated asset classes'.

Let me be clear: I'm not advocating putting all your money into a single stock. That's dumb and dangerous.

Just that if your goal is to build significant wealth, diversification is not the way it's done. Never has been.

Think about the wealthiest people in the world. Most of them got that way via a single holding: the company they started.

Zuckerberg, Gates, Dell, Bezos. All their wealth came from a single company.​

Sure, they may diversify AFTER the massive wealth is created. But that's my point.

To keep wealth, diversify

Diversification is indeed a terrific way to reduce anxiety around the stock market. And even better if you diversify AWAY from the stock market.

Look up studies of how the richest people spread their money.

You'll see public stocks, funds, real estate, land, cash, private investments. But that usually happens later, once they already have their wealth.

​That's how they protect what they have.

It's just not how they got it.

Summary

Just remember: Concentrate to build wealth, diversify to keep it.​

Tommy Sikes​

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