Open the top drawer of your desk. Is it focused or unfocused? Like human nature itself, the destiny of investments is to become unfocused. Diversification has become a popular investment strategy and many corporations have proclaimed their belief in the philosophy of not putting all your eggs in one basket. The stool was the most popular analogy. The three legged stool represented a diversified portfolio and the four legged stool representing a risk free venture.
However, let’s take a little real life analogy. The sun is a powerful source of energy. Every hour the sun washes the earth with billions of kilowatts of energy. Yet with a hat and some sun-screen you can bathe in the light of the sun for hours with no ill effects. A laser is a weak source of energy. A laser takes a few watts of energy and focuses them in a coherent stream of light. But with the laser you can drill a hole in a diamond or wipe out a cancer. When you focus you investments you get the same effect. You create a powerful laser like ability to understand the market. That is what focusing is all about.
A few investors have noticed this secret and a lot are yet to find out the strength in focusing and not diversifying. The reason why a lot of people prefer to diversify is because in the first place they do not know what they are doing. The lack of information is the greatest risk in the playing fields of financial investments and not placing an order. I mean the risk is not in the investment decision but it is in the inability to access the adequate information necessary. I say this because once you have the right information then there is no risk involved again even when your decision may seem to be wrong in the short term but you are relaxed because you know it will materialize in the long term. However because you have the information you are not move by market sentiments you are moved by a projected plan and adequate analysis of the market.
So what do you do now? This is it. Instead of diversifying, go for the adequate information. The papers, the news, the books, the reports and the seminars, it is all in there.
If I can do it you can do it also!