{"id":781,"date":"2006-12-19T23:52:40","date_gmt":"2006-12-20T06:52:40","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=781"},"modified":"2007-04-20T16:04:56","modified_gmt":"2007-04-20T23:04:56","slug":"investors-version-of-grandpas-coffee-can-diversification","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/781\/investors-version-of-grandpas-coffee-can-diversification\/","title":{"rendered":"Investor’s Version Of Grandpa’s Coffee Can — Diversification"},"content":{"rendered":"

For the first time I’d like to post, almost simultaneously, (simulpost?) on a subject which has facinated me for years. My purpose is merely to introduce the subject. A meatier post will follow.<\/p>\n

Investors have been told by Wall Street to diversify since the street signs were put up on the corner of Wall and Broad in Manhattan. On the surface it seems a more than reasonable principle. After all, the only reason for its existence is to avoid losses. And who in their right mind doesn’t want to avoid losses? Indeed.<\/p>\n

Warren Buffett<\/a> and George Soros<\/a> are both multi-billionaires — due solely to their ability to invest in winners. They think diversification<\/a> is for those who simply don’t know what they’re doing. This is because they define risk as the <\/em>result of not knowing what you’re doing. It’s ironic that most of their investments are in businesses that haven’t diversified themselves.<\/p>\n

\"Money<\/p>\n

Here’s what Mr. Buffett had to say to his own shareholders 13 years ago:<\/p>\n

“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.”- 1993 Chairman’s Letter to Shareholders<\/p>\n

Mr. Soros seems to like the more direct approach:<\/p>\n

“Diversification is for the birds.”<\/p>\n

They both have been quoted saying:<\/p>\n

“Risk comes from not knowing what you’re doing.”<\/p>\n

We laugh at the thought of the coffee can full of cash buried in the backyard. But it’s not funny. The reason the old guy did that was because he simply didn’t know what else to do. He did<\/em> know one thing for sure — he didn’t want to lose what he had earned so far. Fear of loss and not knowing what one is doing is what risk is all about.<\/p>\n

Since when do fear and ignorance combine to create great investment portfolios? Mr. Buffett and Mr. Soros say Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

For the first time I’d like to post, almost simultaneously, (simulpost?) on a subject which has facinated me for years. My purpose is merely to introduce the subject. A meatier post will follow. Investors have been told by Wall Street to diversify since the street signs were put up on the corner of Wall and […]<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[8,5],"tags":[],"class_list":["post-781","post","type-post","status-publish","format-standard","hentry","category-investment","category-real-estate","no-featured-image"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":939,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/939\/a-different-view-of-diversification\/","url_meta":{"origin":781,"position":0},"title":"A Different View of Diversification","author":"Cooksquared","date":"January 24, 2007","format":false,"excerpt":"Greg brought me on with the quote, \"I think you would be a good counterpoint to Jeff Brown.\" Well, I guess its time for me to start earning my keep. I fall on the opposite side of this diversification issue. The benefits of diversification outside and inside of real estate\u2026","rel":"","context":"In "Blogging"","block_context":{"text":"Blogging","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/blogging\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":934,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/934\/ask-the-broker-is-there-any-diversifying-alternative-to-real-estate-investing\/","url_meta":{"origin":781,"position":1},"title":"Ask The Broker: Is There Any Diversifying Alternative To Real Estate Investing?","author":"Jeff Brown","date":"January 23, 2007","format":false,"excerpt":"Nick writes:Hi. I often scan your site and you seem to have collected a group of savvy and knowledgeable contributors. Here's my question for you and them: What is the opposite of real estate? I know diversification is a smart strategy and many investors limit their risk by investing in\u2026","rel":"","context":"In "Ask the Broker"","block_context":{"text":"Ask the Broker","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/ask-the-broker\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":4582,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/4582\/bloodhound-blog-radio-interviews-matt-padilla-author-of-chain-of-blame\/","url_meta":{"origin":781,"position":2},"title":"Bloodhound Blog Radio Interviews Matt Padilla, author of Chain of Blame","author":"Brian Brady","date":"September 22, 2008","format":false,"excerpt":"We interviewed Matt Padilla, author of Chain of Blame- How Wall Street Caused the Mortgage and Credit Crisis.\u00a0 This book, released in May, 2008, details a history of non-prime lending, the S&L crisis, securitization of mortgages, and what went wrong. Download and Listen to the 45 minute interview here An\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1147,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1147\/bad-loans-buried-in-the-back-of-the-breadbox\/","url_meta":{"origin":781,"position":3},"title":"BAD LOANS: Buried In The Back Of The BreadBox","author":"Brian Brady","date":"March 14, 2007","format":false,"excerpt":"Let me tell you a story about how the subprime mortgage market collapsed and millions of baby boomers had to accept less money in retirement. If you liked the Da Vinci Code, you're gonna love this one. It's not wrapped up in sex, or murder, or corruption, just good-old fashioned\u2026","rel":"","context":"In "Enduring Interest"","block_context":{"text":"Enduring Interest","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/enduring-interest\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":3355,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/3355\/the-mortgage-dance-ez-just-follow-the-bouncing-ball\/","url_meta":{"origin":781,"position":4},"title":"The Mortgage Dance? EZ: Just Follow The Bouncing Ball.","author":"Sean Purcell","date":"July 14, 2008","format":false,"excerpt":"And the beat goes on...\u00a0 but sometimes it helps\u00a0to have that little bouncing ball show us\u00a0exactly what lyric we are singing this week.\u00a0 All together now: Today the Fed suprised no one by\u00a0opening the discount window to ailing siblings: Fannie Mae and Freddie Mac.\u00a0 Together they\u00a0hold more\u00a0than half of all\u2026","rel":"","context":"In "Real Estate"","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":4455,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/4455\/leveraged-loser-loans-lead-to-loss-of-liquidity\/","url_meta":{"origin":781,"position":5},"title":"Leveraged Loser Loans Lead To Loss of Liquidity","author":"Brian Brady","date":"September 15, 2008","format":false,"excerpt":"I'm kicking this one up to the top, in honor of today's events.\u00a0 It's a historical look about the early MBS markets.\u00a0 Now before you jump me for my incorrect conclusion, I didn't realize that the hedge funds leveraged their loan holdings 10 to 1 (or more).\u00a0 That \"38 bucks\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/781","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=781"}],"version-history":[{"count":0,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/781\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=781"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=781"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=781"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}