Concentrate by thinning out
As most of you know, diversification has been described as a hedge against stupidity. Unfortunately, most investors tend to cower when they see very concentrated portfolios. Those stocks that present the greatest consternation to the average investor, because they represent a departure from conventional thinking, cannot really provide major league hits in a portfolio where they are accorded a minor league weighting.
Many investors at this time of year are concerned with tax-efficient strategies and ensuring that tax-losses are being taken appropriately. I suggest that you consider the quality and valuation of your holdings. Ensure that the “bets” that you have made are appropriate and that you are being adequately compensated for the risk you are undertaking. The only real compensation that we get as investors is an adequate entry price and we are the only ones who can control that.
This is a great time to be thinning out your stocks. Get rid of the deadwood and those names that provide more agita than returns. Get rid of the weeds and the "bad seed." Focus your thinking...concentrate your portfolio. Make it evident in your portfolio what it is you are "rooting" for.
I note in TaylorTree, a magnificent post about this thinking and how it applies to crops. I think, much like Munger drawing insights from disciplines outside of economics and business, you can use these insights in your portfolios.
Crop Stock Management
Finally, and most importantly, here’s wishing all the very best of the season. Wishing you the happiest of holidays and a prosperous and fulfilling New Year!