The Concentrated vs. Diversified Debate: Rethinking Portfolio Construction for Asymmetric Returns

In his latest analysis for "The Future of Investing," Andy Hamer challenges the conventional wisdom about portfolio diversification. The article examines the mathematical reality of returns in concentrated versus diversified portfolios and presents evidence that many investors significantly overdiversify relative to their knowledge edge. Drawing on examples from successful investors like Lou Simpson and Buffett's "Superinvestors of Graham-and-Doddsville," Hamer develops a framework for finding one's optimal position on the concentration spectrum. Rather than presenting a binary choice, the piece offers practical guidance for thoughtfully calibrating portfolio concentration to maximize returns while managing risk. Read the full article here.