Put all your eggs in one basket and watch that basket very carefully. This is the advice from a legendary money manager, Stanley Druckenmiller. In 30 years of managing money, he compounded at over 30% per annum* and never had a down year.
When it comes to investing, few have ever done it better. When it comes to giving investment advice, I think this is pretty lousy.
In fairness to Druckenmiller, who I’ve heard say something like this multiple times, I’ve never heard an important follow-up question: “Is this what you think the average viewer should do, or are you just describing how you thought about portfolio management?”
Maybe I’m wrong, but I can’t imagine Druckenmiller would think that concentrated bets are for everyone.
And what does it mean to be concentrated anyway? This word means different things to different people. If your portfolio is a mix of 500 stocks from different industries and different market caps, but they’re all in the same country and in one ticker, is that concentrated?
What about an investor whose only holding is a target-date fund that owns a mix of global stocks and bonds? Is this person hitching their entire financial life to one outcome?
Anyway, this is probably semantics, which is why I didn’t waste your time with a longer blog post. One person’s Warren Buffett is another person’s Jack Bogle.
*Normally, I would say “annually,” but with those numbers, you gotta show some respect.
Michael Batnick is a managing partner at Ritholtz Wealth Management. He is the co-host of Animal Spirits, What Are Your Thoughts, and The Compound and Friends. For disclosure information please see here.