power your advice

Diversification is Overrated

Nearly everyone advocates diversification to reduce risk in almost everything. However, I question whether it should be the preferred default in our environment of expansion, technology , and much clearer winners or losers.

For example:

  • Do you throw mud at the wall to see what sticks or do you prefer to focus?
  • Do you look for the consensus that frequently dilutes decisions or do you look to experts and people with specific skills?
  • Do you invest in weaker decisions to spread risk or do you prioritize to achieve the best expected outcome?
  • I am not advocating any one answer because solutions vary according to the situation. However, it is essential to consider focus rather than simply trying to minimize risk by accepting mediocrity.Related: Decisions Should Be Based on Analytics and Intuition; Not or Intuition

    Some suggestions:

  • We live in a changing environment. Understanding those changes and reacting may be more important than believing diversification will mediate the change. Change and volatility in things are more rapid now so we must react quicker.
  • Information and data are key. Recognize the parameters of your issues and gather data to analyze alternatives and their potential outcomes
  • Understand your goals and base your decisions on them. In particular growth, cash, short-term, long term, and propensity for risk, are all critical factors in making decisions. For example, I have a friend who made a significant profit and lost much of it from investing in bitcoin . Many of his friends failed to realize that his high propensity for risk was equally responsible for both making and losing money.
  • Betting on winners is frequently better than trying to fix losers. For example, current customers are your best prospects for future businessand dissatisfied customers are the most expensive.

    Just focus!

    I’d love to hear from others who feel strongly about this topic. Do you agree or disagree? What have your experiences been like?