Because for most retail investors, in fact, their knowledge is limited, their funds are limited, and their energy is limited. This has caused that if they diversify their investments, the risks will increase, the use of funds will be uneven, and even their energy will be dispersed, resulting in the inability to concentrate on distinguishing individual stocks and causing blind speculation.

What are the characteristics of most loss-making retail investors I have met? That is, the number of stocks held is very large, from 7 to 8 to more than a dozen. The funds are less than 200,000-300,000, and only one person, even many of them are the result of buying with the wind, and will naturally lose money in the end. So for the vast majority of ordinary investors, concentrated investment is indeed better than diversified investment.

Maybe you don't quite understand this, so I'll explain my opinion on "Buffett said that centralized investment is not as good as diversified investment".

Is it better to concentrate investment or diversify investment?

In fact, some people say that concentration is good, others say that dispersion is good, and everyone has their own rhetoric. You can't say who is good or bad, or who is right or wrong.

For example, from the representative figures of concentrated investment, the most typical ones are Buffett and Charlie Munger.

During Buffett's shareholding career, even though he was in charge of such a large amount of funds and such a huge company, his shareholding still did not exceed 10.

For diversified investors, the typical representative is John Berg, the father of index funds.

His investment philosophy is to hold dozens or even hundreds of different stocks, and then advocate buying the market itself at the lowest cost.

They are all experts in investment and they are all very successful. So from this perspective, there is no difference between concentrated investment and diversified investment, and there is no right or wrong.

Of course, there are many such differences, such as:

The Best Fund Manager-Peter Lynch (Very Decentralized)

Davis double click-Davis (more concentrated, insurance)

Teacher Buffett Graham (scattered)

Long-lived Old Man —— schloss (San)

Reverse investment-Templeton (decentralized global investment)

Bridgewater Ridario (very dispersed)

Yale Fund-David Svencen (Decentralization, Asset Allocation)

So, is it better to concentrate investment or diversify investment? I think there is no difference between good and bad, only suitability. For most ordinary investors, it is obviously more suitable for concentrated investment than diversified investment.

Because of limited energy, limited funds and limited cognition. Diversified investment will increase the probability of stepping on thunder and increase the possibility of stock market losses.

What does Buffett mean by concentrated investment?

Buffett's so-called concentrated investment does not mean that you can put all your funds in one stock, but that you can appropriately reduce the number of stocks you hold, so that you can allocate them more fully and reasonably, reduce your risk and improve your concentration.

So, don't take extreme ideas, and don't think that concentrated investment is just staring at a stock.

Here I break down Buffett's meaning into two points to understand:

first

Concentration is "relative concentration" and dispersion is "excessive dispersion"! !

second

Concentration refers to the scope of competence circle, and dispersion refers to the scope beyond one's own competence circle! !

If Buffett's sentence "it is better to concentrate on investing than diversify" is linked with Buffett's other sentence "invest within your own ability", you can actually make a final explanation.

That is to say, most people's ability, cognition, time, energy and funds are limited.

So don't blindly expand your ability circle, but know how to "shrink". After shrinking, it becomes "relative concentration"!

For example, 10-20 shares are obviously self-sufficient, so controlling the number of shares within 4-5 shares is more convenient for your own research and analysis, and it is also convenient for the allocation of funds to cover positions;

For example, there are all kinds of plates and concepts in the market, so you can't understand them all, so exclude those plates and concepts that you don't understand and only pay attention to the industries and fields that you can understand.

Therefore, Buffett's concentrated investment is actually more suitable for most ordinary investors, and most investors in the market should do the same.