This violates two simple, and obvious, tenets of investing:
1. Don't put all your eggs in one basket.
2. If it sounds too good to be true, it probably is.
1. Don't put all your eggs in one basket.
2. If it sounds too good to be true, it probably is.
3. Past performance is no guarantee of future returns
4. Invest in stuff that has value.
I'd rather be a carpenter in the Catskills making 35K / year and producing beautiful products that enhance life than a Forex trader taking 10x that amount but simply sloshing capital around.
Perhaps. But if you know what you're doing, wide diversification may not be wise.
"How many insights do you need? Well, I'd argue: that you don't need many in a lifetime. If you look at Berkshire Hathaway and all of its accumulated billions, the top ten insights account for most of it. And that's with a very brilliant man—Warren's a lot more able than I am and very disciplined—devoting his lifetime to it. I don't mean to say that he's only had ten insights. I'm just saying, that most of the money came from ten insights.
So you can get very remarkable investment results if you think more like a winning pari-mutuel player. Just think of it as a heavy odds against game full of craziness with an occasional mispriced something or other. And you're probably not going to be smart enough to find thousands in a lifetime. And when you get a few, you really load up. It's just that simple."
-Charlie Munger
http://ycombinator.com/munger.html
Re: 2
"Too much of a good thing can be wonderful."
-Mae West
And I agree that you probably shouldn't put all your eggs in one basket.
But that doesn't mean that wide diversification is the right strategy.
I think some of the greatest successes have occurred because of an obsessive focus (e.g. Apple, Pixar, 37signals, Trader Joes, Chipotle, Berkshire Hathaway, top professional athletes).
"Obsessive focus on being awesome" is not a non-diversified investing strategy.
I disagree. I think focusing on only owning/investing in "All-Stars" is a non-diversified investing strategy.
"Berkshire's CEOs come in many forms. Some have MBAs; others never finished college. Some use budgets and are by-the-book types; others operate by the seat of their pants. Our team resembles a baseball squad composed of all-stars having vastly different batting styles. Changes in our line-up are seldom required."
-Warren Buffett's 2010 letter to shareholders: http://www.berkshirehathaway.com/letters/letters.html
In the tech world VCs and angels seem to want this too. If they only invested in Google, Facebook, Twitter, Groupon, LivingSocial, Amazon, Spotify, etc., I think they'd be perfectly happy.
IMO, DST seems to be implementing this strategy, at least to some extent.
Only if you want to abuse the term "diversified investment strategy" to the point where it becomes meaningless.
When we say you should have a diverse portfolio it does not mean "diversely spread between good assets and crap assets". You should only buy good assets. But you should buy multiple good assets, largely to protect yourself from the fact that what you think is a good asset may in fact be crap.
Look, I understand you're trying to be contrarian here, but "diversify your assets" isn't a point that leaves a lot of room for contrarianism.
"Put all of your eggs in one basket -- and watch that basket!"
Don't put all your eggs in any basket even if you think you have perfect knowledge of it.
My home currency isn't the dollar but my app is priced in dollars and that sucks. I'd far prefer to have Euro earnings and earn a few bitcoins a month as a speculative investment.
Not many people, or at least not many people with nontrivial amounts of money, have all their assets in US dollars. Most folks own shares and/or property. As you say, US-dollar cash assets are a poor investment right now since interest rates are lower than inflation.
Still, keeping all your money in US dollars (in a big brown bag inside a zoo, perhaps) is a lot less nutty than keeping all your money in bitcoins. Even if nothing else, the US dollar has a history of relatively low volatility over the past couple of hundred years, whereas bitcoins have a history of insanely high volatility and dates back to (uhh, goes and checks) 2009.
Major changes to the nature or definition of the US Dollar occurred over the past 200 years:
- In 1945 the Bretton Woods agreement made the US Dollar the world's reserve currency
- In 1933 private ownership of gold in the US was outlawed. Gold was forcibly confiscated for $20 per ounce. The price was then raised to $35 per ounce.
- In 1913 the Federal Reserve System was created
- In 1861 fiat "Greenbacks" were issued
he would prefer most of his apps in Euro and a few in Bitcoin
That's not what extraordinarily low interest rates in the bond market say.
My guess is that the USD is seen as a safe haven during these risky times, but not a long-term store of wealth. That's why treasuries are (temporarily) high.