Stanley Druckenmiller on Diversification in Trading

“I have always made big concentrated investments. I don’t believe in diversification. I don’t believe that’s the way to make money.”

“You are not going to make money talking about risk adjusted returns and diversification. You’ve got to identify the big opportunities and go for them.”

“As far as Soros is concerned, when you’re right on something, you can’t own enough.”

As Warren Buffett has pointed out many times: “diversification is protection against ignorance. It makes little sense if you know what you are doing.”

Of course is that most people have no idea what they are doing when it comes to investing. Most people don’t even understand the difference between speculating and investing.

For this reason and others almost everyone should buy a diversified portfolio of low fee index funds/ETFs.

Warren Buffett points out that by acknowledging that you are not smart money by putting a strategy in place that harnesses diversification you become the smart money.Unfortunately any investor must still choose how to diversify, so they still must learn to make sound investing decisions (portfolio asset allocation requires that an investor actively make certain choices even if it is to buy low fee index funds/ETfs).

– Stanley Druckenmiller