I truly believe diversification is overrated!

(Thread from my personal experiences) https://twitter.com/dhaval_kotecha/status/1253427544092631040

1/ Back in the days when I started investing, diversification was of utmost importance to me. I used to study how different sectors performed in various environments and made my decisions to pick the best company out of that sector.

2/ But then, I never saw the returns I expected. I saw that a few stocks in one sector (tech) kept going up, whereas the stocks in a few other sectors either went down or produced no returns. I went back to the drawing board to see what I need to do next.

3/ Though I was a reluctant seller, I had made a decision to sell all my losers after a lot of thoughts & started buying great companies without worrying about what industries they fall under. I started researching companies, not how sectors performed in different environments.

4/ Personally, investing within the tech sector in different types of businesses is still diversification within your portfolio. For e.g, a company like $CRWD is very different from a company like $CRM or $FSLY even though all of them are in the tech sector.

5/ Looking at my portfolio now, I feel like I made a good decision a few years back to not diversify based on sector thematics. Had I not made that call, I'd still be having subpar returns with no/very little alpha.

6/ "The academics have done a terrible disservice to intelligent investors by glorifying the idea of diversification. Because I just think the whole concept is literally insane. It emphasizes feeling good about not having your investment results...

... depart very much from average investment results" ~ Charlie Munger

I'd like to hear your thoughts on this topic over which I have had a lot of conversations with my friends (and always being the lonely one when it comes to vouching for not diversifying in different sectors)