Replies to post #827 on Biotech Ideas

[surfer44]

I'm somewhere between Peter Lynch and Charlie Munger....lol

Charlie Munger suggested investors should not hold many stocks, advocating for a concentrated portfolio of perhaps only three to ten holdings if the investor truly understands the companies. He believed diversification beyond a few key investments was unnecessary and called it "diworsification," arguing that only a handful of truly great ideas exist, and diluting them with mediocre investments is a mistake.

Key Points of Munger's Investment Philosophy

Concentration over Diversification: Munger was a proponent of concentrating investments in a few businesses he deeply understood, rather than owning dozens of companies.

Focus on Quality: He believed in finding and investing in "wonderful businesses at fair prices".

"Diworsification": He coined the term to describe excessive diversification, which he felt spread a portfolio's potential for high returns too thin across many mediocre investments.

Understanding is Key: The number of stocks to hold depends on the investor's ability to understand and track their performance; it's difficult to keep track of the fundamentals of a large number of companies.

Long-Term Perspective: Munger's strategy involved investing in fundamentally good companies and holding them for the long term, waiting for them to bear fruit.

[gfp927z]

Surf, >> Magellan Fund <<

I think part of the problem was the huge amount of new money that flowed into Magellan every month. Lynch had to move into larger stocks, so Magellan's performance eventually 'regressed to the mean'. Buffett had a similar problem, and his best performance by far was in the early days when he could have concentrated positions in smaller stocks.

In contrast, I'm mainly owning so many stocks to make it too cumbersome to go to cash. With the S+P 500 ETFs I would always grab the profits as soon as they appeared, but then you are timing the market. With 200+ stocks, I'm forced to stay the course and be LT buy / hold. Stock collecting is also a fun and interesting pastime in retirement. I figure it beats hanging out at the bar and chasing floozies :o)



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