Concentrated portfolio or Diversified portfolio?

Copying is very difficult especially if you want to be the first! How can you copy from the second best and be first? So that makes copying difficult. However you could take parts of many and look original…then you need not defend your copying!

Warren Buffet made most of his money by staying and investing in the USA. Late John Templeton made most of his money by betting on markets world wide. He was in Asia, he was in commodity stocks..all over the place.

Which strategy works? And the fact that a strategy has worked well from 1977 to 2007 it does not mean it will work from 2007 to 2037.

If you read what John Templeton says, you will believe that you need to create a diversified portfolio – a little of Japanese stocks, lots of American, some emerging markets, etc. in equity alone. Apart from this some debt – short term, long term, etc.

Warren Buffet on the other hand says you should concentrate your portfolio if you wish to create wealth.

Whom should you listen to?


You should have a concentrated portfolio – which means in the Indian context, if you have a Rs. 25L portfolio you may not need more than 6 companies. However, once you have created some wealth, you need to protect a portion of it from the vagaries of the market.

Let us take an example. In case you had invested Rs. 10,000 in Wipro in the year 1980, today it would be worth Rs. 350 crores (assuming you consumed all the dividends). However, at various stages you would have sold some part of your wipro shares to invest in other companies too – now if WIPRO had not done well, but some other company in which you invested (say Silverline) had done well, you would have looked smart (but actually you were lucky, simply, lucky).

However if you are still holding on to ALL the shares of WIPRO, it makes sense for you to sell a portion of WIPRO and invest in a simple index fund, some real estate, some rbi bonds, etc.

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2 Responses to “Concentrated portfolio or Diversified portfolio?”

  1. How do small investors, that is individuals, invest in foreign markets? i have no information on this. and that about the taxes etc.

  2. To KalpK.
    Now there is a way you can invest in foreign markets. three companies including ICICIDirect allow you to invest in US markets (you need to apply for this and some trips to their branch to transfer money). After this you can buy or sell any US stocks (including ADR of other countries) just like you buy or sell any India shares. However I did not opt for this for multiple reasons:
    1 – The shares will be in the name of a US company (Penson Financial) and ICICI shows it as if it is in your name.
    2 – Although unofficially your agent says that you don’t have to pay taxes in US on dividends and on capital gains as you are NOT a resident, I personally fe you will have to pay. It is bit inconvenient to pay tax to US from here.
    3 – After you die, it is bit cumbersome for your heir to get the shares transfered in his/her name.
    Note: I gathered this info aftr going through their application form. I might have misunderstood. So, you need to do your own analysis.

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