Great article, Chris.
Gotta laugh at the negative comments here, especially since the author wrote in advance that the words would indeed "piss off" a lot of people. It was right in that area too.
The article and the negative replies to it highlight that some financial advisers simply don't have the aptitude or the desire to dig deep into what is going on with a stock or an industry or other investment category. And, hey, this is okay, as long as that financial adviser let's a person that is competent in these areas take charge of the actual investment decisions, and if this is done through diversification then great. However, its safe to say that many financial advisers don't let this happen. It's probably because of ego - they think they know it all and don't want to look ignorant. So, they don't follow the Series 65 study material and SEC guidelines and do what is best for the client, but rather do what is best for the financial adviser's ego.
A point of the article is: with very solid investment analysis, diversification is not needed to any large degree, if at all.
There's risk management of investments and this should go without mentioning but I'll say it here since there's some financial advisers that use diversifying to manage risk. And if a financial adviser works in a firm that cannot scale to executing investments that are made from careful analysis, then the firm he or she works in probably doesn't want to invest in making this happen. This is commenting on "12284371" words, which are:
"…when managing a book of clients, the only way to do this would be to create some type of model portfolio that would apply to all clients who have the same risk tolerance and same goals for their account." Yeah, man. It's called technology. And it's done by firms that know what they're doing. If a firm cannot create a software solution to this problem, I pity its clients.
Also, this comment from webapalooza: "…Trying to predict where to put your money based on "an awareness of impactful industry and economic developments" is not investing, it's speculating."
So according to this person, when one is "investing", the "investor" doesn't have or perhaps even need an awareness to impactful industry and economic developments…hmmm….so you just blindly throw money in with the hopes of accumulating more without looking at say:
• what the general economy is doing
• what is happening in the industry that may be invested in
• what is happening in the region where the products or services will be sold, etc.
And speculating and investing are related, though by definition speculators are willing to take on more risk for the hopes of gaining more rewards quickly. Speculating is really a more intense form of investing and if wanting to be aware of important industry and economic trends before putting money into something is speculation, then I'll speculate any day rather than invest.
And this statement: "whereas the gyrations of the stock market are, for all intents and purposes, random and unpredictable" - sounds like a sound bite from a government sponsored, "all is okay, just move along" TV advertisement. And it provides enough evidence to prove this person has a conflict with reality.
The stock market is controlled by people, not Nature. The markets were created by people, are run by people, and are controlled by people. It is not controlled by some unknown force in the Universe. If the private federal reserve bankers are counterfeiting billions and billions every month to purchase home mortgages in America along with loaning billions to member bankers with near zero interest rates, some of that money WILL go into the stock market, hence the large gains in the major indexes recently. This alone discredits the "random and unpredictable" moves. Also, market manipulation is rampant and rarely enforced. When I worked at a market-making firm, I and everyone else at my firm experienced first hand SEC regulations being broken all the time by NYSE specialists, which are a gang of thieves. The manipulation evidence is overwhelming but yet many people ignore the facts and continue to believe that the stock markets are some special creation that God has bestowed upon us. Here's just a tiny bit of news on that for people who want to know and actually care:
So, no, stock markets aren't random and unpredictable. They are driven by PEOPLE's greed and fear, and some of those people can pull the markets in whatever way they want. Yes, its true. Oh, and the federal reserve is as federal as federal express. Its run by a bunch of private bankers that establish loans with our US Government public servants and make a killing off of it, in more ways than one. Get a clue.
However, if one is astute enough, one can figure out what is going to happen after all of this manipulation, or during it.
And hey, ryan_plovie, your comment illustrates just how capable, confident, and knowledgeable you are with investments. Thanks for the warning.
I'd place my money with you, Chris. You seem to know that diversification isn't all that, and you definitely seem confident and capable enough to place money in areas that have been thoroughly researched, even it its just one stock.