Warren Buffett’s Top Advisor Warns Against Mindless Diversification in Your Investment Strategy
Key Takeaways
- In contrast to most financial advisors, Munger called wide diversification “protection against ignorance,” useful only when you don’t have conviction.
- Holding too many positions, he argued, can raise costs, blunt big winners, and still leave you exposed to market shocks.
- Munger advocated a balanced approach—owning a few great companies plus low-cost index funds—that can capture upside without unnecessary clutter.
- But he said “know-nothing” investors—which is most people—should rely on broad market index funds.
Diversification is almost a sacred word when it comes to investing, but the late Charlie Munger—Warren Buffett’s longtime partner at Berkshire Hathaway—argued that some investors should…
