On diversification...
Diversification is really just another way of saying lowering risk. It reminded me of an interesting story that I heard a horse gambler say on the radio.
He was asked what his system was and he said it was very simple. In every race he bets he bets the favorite horse to SHOW. Not to win, not to place, but to show. The risk of it coming in the top 3 is so low that he can consistantly win. Less money, of course, but because he's so consistant and doesn't lose very often, he can build up more money over a long period of time rather than risking it all to win, even on a horse that is the favorite.
I thought that was a very interesting way of looking at things. Furthering this though, there's a guy on the radio now adays named Phil something....anywayz, it's www.philsgang.com.
His philosophy is to make 1% per month. 2% is a huge win for him. If he's up 1 or 2% he just sells, takes the money and buys something else. His goal is to make 12-24% annually by making 1-2% monthly. Anything above that is extra. I thought that was an interesting way of doing things.
- Takr
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