Concentrated Portfolios Are Dangerous

Concentrated Portfolios Are Dangerous by Stephen Aust, MarketCycle Wealth Management

The newest investment fad is called “CONCENTRATED INVESTING” and there is even a new book that just came out on the subject.  The idea is to pick a tiny handful of the best stocks, the few that are going to go up one-zillion-percent in one month, and to shun the rest.  Intuitively, most people would understand that this would be a dangerous proposition that is fraught with difficulty, however the idea is rapidly gaining in popularity as people re-forget that the tortoise beats the hare and with much less effort.  Concentrated investing is the exact opposite of holding a much lower-risk diversified portfolio.

According to J.P. Morgan, since 1980...