Investing

Stop. Stop Diversifying. Do Not Spread Out Your Investments

Buffett says diversification makes very little sense and I agree

Photo by Yan from Pexels

I once directly asked Warren Buffett about whether he likes diversification. You can see the YouTube video here where he answered my two questions about diversification.

He told me, and others in the 1996 annual meeting that he doesn’t like to diversify:

“It makes very little sense for anyone who knows what they are doing.”

He went on to say that diversification is a protection against ignorance. By the way, he wasn’t being pejorative. If you don’t know how to analyze businesses then diversification is fine, he said.

However, he said that owning 30 or 50 stocks is a “confession that you don’t understand the businesses that you own.”

What You Need To Do Well

On the other hand, he said, “three wonderful businesses are more than what you need to very well in this life.”