D.I.V.E.R.S.I.F.Y. Why Diversification Is The Exact Opposite Of What You Should Be Doing!

One of the most famous, wealthy and respected entrepreneurs of all time, Andrew Carnegie, once famously stated:

“Concentrate: put all your eggs in one basket, and watch that basket.”

Andrew Carnegie was born in Scotland in the 1830’s and emigrated to the United States when he was young.  He grew up in a very poor household and started out working a job as a telegrapher.  He was smart with his money (paid himself first) and invested his money into a few lucrative investments of that era.  Eventually he successfully built the Carnegie Steel Company during the industrial revolution, which became one of the largest and most profitable steel companies of all time.  He eventually sold the company and became the riches man in the world, with an estimated net worth of over $310 Billion (in today’s dollars adjusted for inflation). 

Now where did we get the notion that diversification is how we are supposed to save for retirement and build wealth?  If one of the wealthiest people in history stated that you should concentrate your money, why would anyone in their right mind do the exact opposite and diversify? 

The number one reason why most people would argue for diversification is for safety.  They say that it reduces your risk.  The problem with this idea is that without risk, there is no return!  If you want to become a millionaire, you cannot follow obsolete ideas like diversification.  These ideas simply will not provide you the returns you are going to need to mathematically become a millionaire (in any reasonable amount of time). 

Here is an acronym that I created to sum up why diversification sucks!

 

D.I.V.E.R.S.I.F.Y. 

Distraction

When you diversify your money and investments, you have too many distractions to really make good money.  If your money is spread out too thin, you will not see any significant return.  If you want to get rich you need to be able to get better than average returns on your investments. 

Inferior

Diviserification is an inferior investment concept.  If you look at some of the wealthiest investors in the world, they do not diversify.  They focus their money.  They make huge focused investments in a handful of companies and watch their wealth explode!  They do not invest in diversified mutual funds or index funds.

Vague

Diversification – to reduce risk or volatility by investing in a variety of assets

Vagueness – thinking in an unfocused or imprecise way

Diversification is too vague to make you any significant money in any reasonable amount of time!  Maybe you can accumulate $1 million over 30 years if you are lucky enough to survive the recessions, but who wants to wait 30 years to get their first million anyway?

Extortion

Wall street wants you to diversify!  They are the ones who push this idea of diversification.  They want you to turn your money over to them, so they can grow rich on your money.  They want you to continually contribute to your 401(k) so that they can charge annual fees on your retirement savings.  Wall street does not want you to focus your investments because they don’t make money when YOU control your money.  Some retirement plans and/or pension plans are not even optional with some employers!  This is extortion!

Restrictive

Investing your money in a diversified portfolio is extremely restrictive.  Many plans have limited choices of investments for you to choose from.  You should have complete control of your money at all times and be able to whatever you want whenever you want.

Slaughtered

Every single time there is a crash, the masses get slaughtered.  The masses believe in diversification.  Don’t be part of the masses, be a contrarian, and don’t get slaughtered along side everyone else. 

Inopportune

Those who are tied up in diversified investments are going to miss huge investment opportunities that pass them by!  You need to have your money ready to go at a moments notice so you can jump on that opportunity when it comes.  You are missing huge opportunities by investing in a diversified investment portfolio. 

Fantasy

The idea of saving your way to wealth is a complete fantasy!  If you want to become a millionaire, you need to be a hands on investor and have complete control of your money.  If you don’t know anything about investing, whether it be stocks, real estate, whatever, go get educated so that you will know what you are doing.  In a world with rock bottom interest rates, you are not going to become a multimillionaire by saving your way into retirement. 

Yawn

Yawn!  Diversification is slow and boring!  Being involved in your own investments and focusing your efforts is much more fun than putting money into a retirement plan every paycheck.

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