Monday, February 13, 2006

Warren Buffett on Focus Investing and diversification

“Risk can be greatly reduced by concentrating on only a few holdings.”

“Our policy is to concentrate holdings. We try to avoid buying a little of this or that when we are only lukewarm about the business or its price. When we are convinced as to attractiveness, we believe in buying worthwhile amounts.”

“You don't have to be right on everything or 20%, 10%, or 5% of businesses. You only have to be right one or two times a year. I used to handicap horses. You can come up with a very profitable decision on a single company. If someone asked me to handicap the 500 companies in the S&P 500, I wouldn't do a very good job. You only have to be right a few times in your lifetime, as long as you don't make any big mistakes.”

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