The Secret to Smarter Investing ??

Hello Intelligent Wealth readers,

Here’s a question for you: Is your investment portfolio starting to resemble a bloated restaurant menu? You know, the kind of menu where quantity takes precedence over quality, and the results are, well, forgettable?

In the world of investing, over-diversification can feel safe, but it often leads to mediocre returns. The solution? Focus.

This week, our Head of Research, Awet Ghirmay, shares a brilliant analogy inspired by celebrity chef Gordon Ramsay say’s Kitchen Nightmares. Ramsay often finds that struggling restaurants fail because they try to serve too many dishes, creating chaos and subpar quality. His fix? Cutting the menu down to a few standout dishes and making them exceptional.

The same principle applies to investing. A sprawling portfolio of hundreds of stocks may feel like a fortress of diversification, but in reality, it’s nearly impossible to manage and understand each holding deeply. Instead, concentrating your efforts on fewer, carefully chosen investments - say, fewer than 30 - brings clarity, control, and better odds of achieving exceptional returns.

Warren Buffett’s Recipe for Wealth

As Warren Buffett wisely put it, “Diversification may preserve wealth, but concentration builds wealth.”

He’s right. Research by Hendrik Bessembinder reveals that between 1926 and 2016, just 4% of companies created all the wealth in the US stock market. Owning the right standout performers, instead of an average mix, is the key to success.

Buffett himself is a shining example. While he has had 12 major winners during his career, the majority of his wealth came from just four of those investments. His patience, discipline, and focus on compounding returns were crucial to his extraordinary success.

Why Less Is More

Concentration isn’t reckless - it’s strategic. By dedicating time and energy to fewer investments, you gain the ability to deeply understand and capitalise on opportunities while avoiding the pitfalls of spreading yourself too thin.

Remember, investing isn’t about owning more; it’s about owning the right things.

What You Can Do Today

1?? Review your portfolio - are you holding too many average performers?

2?? Focus on identifying quality investments with strong fundamentals.

3?? Have the patience to let your winners compound over time.

If this resonates with you, take a moment to reflect on how you can apply this approach to your own financial journey.

?? Want More Insights?

This blog was written by Awet Ghirmay, our Minerva Money Management's Head of Research, and part of our ongoing efforts to help you achieve smarter, more effective investing strategies. Follow our Intelligent Wealth Podcast, for weekly discussions on market trends, wealth-building strategies, and how to invest in great businesses.

Until next time, stay focused and invest intelligently.

Warm regards,

Tony Byrne

Fund Manager

Minerva Money Management

About Us

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Risk Warning: The value of investments and the income derived from them may fall as well as rise. You may not get back what you invest. This communication is for general information only and not intended as individual advice. Please seek professional guidance before taking any action.

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