Why Most Diversification Is 'Deworsification’ | Charlie Munger

Описание: "Diversification is a protection against ignorance. It makes very little sense for those who know what they are doing." — Charlie Munger
The entire financial industry is built on a single premise: "Don't put all your eggs in one basket." They sell you mutual funds with 500 stocks to "manage risk." Charlie Munger called this madness. He argued that wide diversification is not a strategy for wealth creation; it is a strategy for guaranteed mediocrity.

In this video, we break down why Munger believed that adding a 20th stock to your portfolio doesn't lower your risk—it mathematically lowers your return. This is the concept of "Diworsification": the act of diluting your best, high-conviction ideas with your tenth-best ideas just to feel safe.

We explore Munger’s "Concentration Philosophy"—the radical idea that you should only own the businesses you understand deeply, and when you find a great one, you should bet heavily. We analyze the math behind why a portfolio of three wonderful businesses is actually safer than a basket of fifty average ones.

In this video, you will discover:

The "Know-Nothing" Investor: Why Munger admitted that diversification is fine for people who don't know how to value a business, but is a "confession of ignorance" for anyone else.

The Dilution Effect: How adding more stocks to your portfolio mathematically pulls your returns down to the average, ensuring you never beat the market.

The "Punch Card" Rule: Munger’s famous thought experiment: if you were only allowed 20 investment decisions in your entire life, you would never buy a mediocre company, and you would likely retire rich.

Volatility vs. Risk: Why Munger didn't care if his portfolio dropped 50% in a year, and why he viewed "price fluctuation" as totally different from "losing money."

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Let me know in the comments: Do you agree with Munger that wide diversification is for people who don't know what they are doing?

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