To The Moon

When investing, I find that there are so many contradictions that exist. From following the crowd vs avoiding the crowd, to buy low sell high and buy high short low. Given the lengthy amount of discussions that I possible with all the conundrums, I shall start with a baby step and attempt to tackle one at a time and starting with this: Diversify or Diworsify? The point for diversification is to reduce risk by placing your eggs in multiple baskets. With the hope that although all might not hatch, in fact some might turn out to be rotten, that a golden goose might turn up. Also, based on the 80/20 rule, if 80% of the eggs gives a nominal gain, hopefully that 20% will become a multi bagger and cover up all the potential downsides. Finally, by spreading your investments across various industries (eg EV, Healthcare), instruments (eg Gold, Stock), country (US, China, SG),time (DCA monthly, quarterly), strategy (technical, growth, value), the will be never a chance that your investment will go zero, with potential upside when things goes right. However proponents against diversification point out that when taken to the extreme, it become diworsification. Spreading your bets might not turn up any golden goose at all, and if your temperament is wrong, you might just sell things when each sector or investment is at its worst. The 80/20 rule is a generalisation and what if the 80% crash is a lot more than the 20% gain? Lastly, by attempting to invest in all sorts of instruments in multiple sectors, time and industry, etc, it will only produce a bad or at most average result. Have you ever met a cook or hawker that can cook all dishes well? (Korean, Jap, Chinese, Western, etc) Precisely. Focus or Overly narrow minded? Proponents of the school of focus share that by doing things within your circle of compencywill not only generate good returns, but great returns over time. This is because you will get wiser and more skilled in the area of your choosing over time. The ability to get insights and information thatthe market does not know, is also possible with focus. If the investment scope is identical orsimilar to the place you work at, very quickly you will know if the analysis report is valuable or fluff. Lastly, focus allows huge gains mathematically speaking. A doubling of 30% of your position is equal to 60%, however if your position is only 1% of your portfolio, it results only in a 2% end result. The risks of focused investing is also present. You may give up early in your endeavours to focus on a topic that is too difficult or becomeoverly arrogant in your belief or opinion of a particular stock. This will lead to a humbling experience later. A 30% bet of your portfolio may not be wise as well as a 50% crash will leadto a 15% loss in your portfolio. Can you stomach it? Conclusion Well neither methodology is perfect. For the beginner, I would suggest that you take stock of yourself first. Be brutally honest with what you know and do no know, as well as what you can invest (in cash and time) and what you can afford to lose. If you don't have time, but you have the cash or funds, DCA into a broad based index will do just fine. The alternative will be to start small and focus on a few areas (3~5) to invest. If you're the intermediate investor with more years of experience, portfolio sizing and understanding your edge and investment philosophy will be useful on the long run. These topics are huge so I won't discuss more here. You might be investing in about 10~20 stocks or positions already. If you're the expert investor, you'd probably have many many years of experience across multiple instruments and countries with a solid track record of both success and flops. I would love to hear from you and learn from you too. What are your thoughts? Diversify or Focus? How many investment areas do you look at? Please like and share to benefit others. Thanks 🙏