Common wisdom seems to suggest that you should diversify your investments.
But is this correct?
In this series of short videos, we discuss the common mistakes we’ve seen investors make, because the more you know about the most common mistakes that investors make, the better your likelihood of building lasting wealth.
Today we discuss why some investors have the mistaken belief that you must diversify to be successful.
In my opinion it is wrong to try and diversify too soon.
I remember reading Napoleon Hill’s great book Think and Grow Rich many years ago where he said that successful people specialise in one area – they don’t diversified.
On the other hand, you will find many financial planners telling you to diversify.
Why? Because if you put all your eggs in one basket and something happens—like dropping it—you’ll lose everything.
Warren Buffet said it well
“Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.”
Robert Kyosaki put it this way:
“Many financial advisors recommend that you diversify for your own protection. What they fail to tell you is that it is also for their protection. Since most financial advisors cannot tell you exactly which stock or mutual fund is a great investment, they tell you to buy a bunch of them.”
In my mind diversification leads to averageness – bottom of the best and cream of the bottom.
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I’ve found that wealthy and successful people – be they a business person, entrepreneur or investor – have one in common: they specialise.
They all focus their concentration on one single earning activity.
They eventually became exceptional in that one activity by continuously improving their skills and increasing their knowledge in that one activity.
Despite the myth going around that it is good to have multiple streams of income the wealthy very rarely engaged in multiple earning activities.
I remember one astute colleague telling me “If I try to do five things to earn money, I will lose money in all five things. So I focus on doing one thing really well.”
If you want to be rich, you’ve got to be great at something.
And to be great at something, you’ve got to focus on that something. And that’s where you put all of your eggs!
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In challenging times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s what you exactly what you get from the multi award winning team at Metropole.
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