Deworsification: Real or Conspiracy?
Sure, not keeping all your eggs in one basket is generally good advice. However, to what extent does the financial industry exploit this simplistic idea through fear for fees and additional AUM?
Concentration risk does not map equally across all assets. For example, being concentrated in NFTs may expose you to more downside risk than being concentrated in energy utilities or real estate.
Yet, in my experience, financial advice usually boils down to concentration equals bad, diversification equals good. Look for ways to spread out the risk, protect your gains, smooth out volatility.
Oh, and by the way, financial service providers have all these amazing products to help you diversify! Sure, there’s small fees here and there for the privilege, but think of the reduction in RISK!
By following conventional advice and diversifying my positions, I have left millions on the table. A retroactive analysis would appear to indicate no real protection from risk, only taxes and fees.
The unintended primary benefit to diversification for me has been increased cash flow, even though that idea is also somewhat of canard.
Anyway, it just got me thinking that we are being marketed to heavily and it’s confusing the reality of holding concentrated positions in strong companies and industries. To be clear, I’m not knocking the concept entirely, merely observing the other hidden interests in play.
I am 44m, NW 12m inclusive of primary residence. Tech and real estate are primary drivers.
Edit: 20% of you agree with me, but the rest of you will once you think more about it.