{"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":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,5],"tags":[],"class_list":{"0":"post-781","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-investment","7":"category-real-estate","9":"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":1667,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1667\/the-800-pound-gorilla-in-the-corner-the-meltdown-of-the-wall-street-mortgage-market\/","url_meta":{"origin":781,"position":2},"title":"The 800 pound gorilla in the corner – the meltdown of the Wall Street mortgage market","author":"Morgan Brown","date":"July 16, 2007","format":false,"excerpt":"As we go about our daily lives in the mortgage and real estate world; dutifully performing our job functions and taking the high road of customer enlightenment via blogs such as Bloodhound; we are faced with a very large gorilla looming in the corner of our workplace. That gorilla is\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":1566,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1566\/how-do-you-get-to-carnegie-hall-practice-how-do-you-get-to-the-wall-street-journal-online-genius\/","url_meta":{"origin":781,"position":3},"title":"How do you get to Carnegie Hall? Practice! How do you get to the Wall Street Journal Online? Genius . . .","author":"Greg Swann","date":"June 22, 2007","format":false,"excerpt":"Michael Cook's post on Private Equity investing was picked up as a related-info link by The Wall Street Journal Online. We've been linked from a lot of interesting places, but I think this is the new high-water mark... Technorati Tags: blogging, investment, real estate, real estate marketing","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":1947,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1947\/wall-street-fed-cut-sittin-in-a-tree\/","url_meta":{"origin":781,"position":4},"title":"Wall Street & Fed Cut Sittin’ in a Tree…","author":"Lani Anglin","date":"September 18, 2007","format":false,"excerpt":"I know Jeff's working on a whopper of an article to follow up on his last gem; what do YOU think of the rate cuts? \u00a0 \u00a0","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":1889,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1889\/arms-look-scary-before-they-look-good-or-how-wall-street-dupes-the-little-guy\/","url_meta":{"origin":781,"position":5},"title":"ARMs Look Scary Before They Look Good or (How Wall Street Dupes the Little Guy)","author":"Brian Brady","date":"September 4, 2007","format":false,"excerpt":"I don't look real smart today, do I ? Mortgage rates in general took a fairly substantial dive during the previous week with longer term rates dropping double digits in most cases and some rates returning to mid-2006 levels. However, the Mortgage Bankers Association reported a spectacular increase in the\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"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}]}}