” Wide diversification is only required when investors do not understand what they are doing.” – Warren Buffett
The simple answer to the above question is there is none. A portfolio is a living thing. It changes according to the investing environment.
My portfolio is up 206% in six years while the Dow Jones is up 71% at the same time (figure below). Almost three times above the market rate of return.
Am I a genius or just lucky? I must say I have made the worst investing mistake of my life during this very timeframe (more on this in my future post).
By no means I am genius. I consider myself an apprentice of Buffettology (just by reading books related to him) at the same time I have no background on Finance or Accounting. I am a perfect example of how a stupid person can do perfectly alright in the stock market.
What exactly is my advantage over the millions of retail and institutional investors? None, I think. So, how did I achieved the above feat? Six years is a very short time to test my ability to beat the market. I might have a big mistake in the future and all is gone. I think I am just lucky.
A portfolio is a living thing. It changes according to the investing environment.
To my dear readers, here is what I did. I applied these three basic rules to construct my portfolio.
- Never Lose money
- Invest in the growing industry
- Wait, wait and wait
My portfolio consists of the following companies.
- Alphabet
- Berkshire Hathaway
- Amazon
- Alibaba
- Tencent
- Oracle
- Home Depot
- Disney
- Microsoft
- Netflix
- Baidu
- Chipotle Mexican Grill
- United Health Group
- Nike
- Apple
- Wells Fargo and Company
- JPMorgan Chase and Company
- Starbucks
- Costco
- Tesla
- Domino’s Pizza
- Humana
Pretty much all the big corporations. A pure diversification (Best way for dummies like me). It looks funny, but the return is not.
I invested purely with gut feelings, intuition, big picture in mind and no financial/industry analysis.
The first thing is whether I make money or not I did not want to lose my money. I did not see those companies going bankrupt in near future to totally lose my capital.
Second, I estimated those companies and industry to do well and fostering in 20-30 years down the road. I invested purely with gut feelings and intuition and no financial/industry analysis (having a big picture in mind). I do not recommend this. This is not the right way to deploy your hard earned money.
Lastly, I did nothing but waited. I bought more when I have money and adjusted the percentage from one company to another based on market performance. Again, purely with a big picture in mind and gut feelings.
Is this the right way to go? Maybe not. But as long as my portfolio does well, perhaps this is the right way!
Disclaimer – Long position on all listed above.
Some Good Reads.
- Warren Buffet predicted the fall of Sears a decade ago
- Passive as a factor
- Investing in unknown and unknowable
Arrow of Performance 
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