WWII 014: Concentrate or Diversify, Penny Stocks, Newbie Stock Investing, Does Speed of News Lead To Better Returns

In this episode of the podcast, I lay out the pros and cons of concentrating or diversifying. Here are some highlights:

Main Topic


· Active, educated investors

· No speculating when concentrated

· Watch correlations in the portfolio

· Higher returns by selecting only the best

· Won’t sleep as well at night

· Black swan can cause a problem

· When everything is correlated, its problematic

· Consider that some holdings may be diversified themselves


· You will achieve closer to market returns

· You will sleep better at night

· Better store of wealth

· Mix is really important if you are heavily diversified

· Not a great way to become wealthy through investing

· Mutual funds diversify, and you don’t see many stories of wealth creation using mutual funds.

· You will know much less about what is in your portfolio

The strategy we've adopted precludes our following standard diversification dogma. Many pundits would therefore say the strategy must be riskier than that employed by more conventional investors. We disagree. We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort-level he must feel with its economic characteristics before buying into it."

Warren E. Buffett
Berkshire Hathaway

Ask JB:


I'm beginning to learn a bit about investing via articles and a couple of books. I don't hold any stock, I'm just researching because I find it interesting. I have a couple of questions about penny stocks and stocks that are below one cent.

For example, take a look at Arcadia Resources. You can clearly see that it often fluctuates as much as 50% per day, on a fairly regular basis.

What is to stop someone from buying a bunch of stock when its at its low end, and sell it when its at its high end, and repeat? Buying even $1000 of stock in this would send you way over the average volume traded, so is there a limit on how much you would be able to buy? Would buying that much effect the price of the stock? Would you even be able to sell it?

Best intro level investing service? (self.investing)

submitted 1 year ago by Babatoongie

Hello, I'm interested in starting to look at beginning some stock market investing, but I'm not sure which service to use to purchase and trade stocks. I just want to explore trading, learn the ropes, put some money in and experiment. So I'm not looking for professional level tools since I'm not a professional investor, but I am looking to learn. I hear about ScottTrade, Etrade, Capitol One Share Builder 360, etc. Which is the best?

Do you have a burning question on investing you would like answered? Click the button below to send it to me and I will answer it on the podcast!




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Thoughts on this podcast? Disagree with me on some point? Something I missed? Leave a comment!

About the Author

Jeremy Scott Bailey is an investor, author, entrepreneur and host of the "What Works In Investing?" podcast now available on iTunes. He is founder and Chief Investment Officer of Burgeón Group, Inc. an investment advisory firm that provides portfolio management services to families and individuals.

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