When I read a financial media headline that completely deflates one of Wall Street’s classic investment management fallacies, it gets my attention.
Last week, Jim Rogers took the time to “blow up” the investment management foundation block of diversification. Here is the article that summarizes his longer interview.
Jim Roberts is a world-class, all-time-greatest investor. He co-founded the Quantum Fund – one of the world’s most all-time successful hedge funds. In one ten-year period, the fund had investment returns of 4200 percent.
Diversification has been preached by investment advisors to individual investors for decades. It is a classic example of herd mentality investing. Nowhere is diversification more commonplace than company 401(k) retirement plan provider websites.
I have been reading company 401(k) retirement plan web sites since 1999. I have never NOT seen diversification promoted as the basic tenet of how to manage company 401(k) retirement plan accounts.
Jim Rogers has never bought into the financial services industry diversification propaganda.
“Well, I know that people are taught to diversify. But diversification is just something that brokers came up with so they don’t get sued.”
For years, I have told my clients and prospects the same thing. Maybe they will finally believe me when I e-mail them a copy of this article.
Thankfully, Mr. Rogers did not stop there. He also states, “If you want to get rich… You have to concentrate and focus.”
In real-life investment management, you only need to own the two or three best default mutual fund options on your company 401(k) retirement plan menu. You just need an independent, third-party fiduciary level of investment advice on which ones to own.
More and more investment advisors are offering individual company 401(k) retirement plan account investment advice. One of their main tools is third-party mutual fund ranking tools for any company 401(k) retirement plan default mutual fund menu.
I will leave to last word on the diversification topic to Jim Rogers.
“The expression on Wall Street is, don’t put all of your eggs in one basket. Ha! You should put all of your eggs in one basket.” But be sure you’ve got the right basket and make sure you watch the basket very, very carefully.”
Ric Lager
Lager & Company, Inc.
