Diversity is strength, especially in the world of investments.
Of course, there are people who have done well in their investment journeys by focusing on a few companies. Unfortunately, I am not one of them. My initial stock picks in SGX, the local banks, did well. My subsequent investments (even those in blue chip companies) did not fare so well.
It is not easy to pick stock, especially one that can withstand the travesty of time. Opportunities come and go, crisis hit us from time to time, business models need to evolve with changing time and consumer preferences. Suffice to say, the only constant is change and humans generally do not deal well with change.
A company may once be the media and stock darling. A few years later, because its management and/or business did not evolve, it ended up in judicial management. Think Hyflux.
I am quite conservative. And I try my best to follow WB’s rule not to lose $. My aim is to allocate about 50% of my investments to equities. Within that, 50% to passive ETFs. In other words, 25% of my net worth should be in low cost ETFs to capture market beta.
Am I near my target? Far from it. But I am taking active steps. Compared to one year ago, the ETFs in my portfolio have more than quadrupled. I am looking to shift even more $ into this asset class and reduce my exposure to specific names. The index companies may come and go but I don’t have to be worried. Buying the index assures me of owning the best companies, regardless of individual performances. This is the beauty of diversification.