Diversification or Diworsification?

Hey folks,

Yeah, I know, the top analysts and brokerage firms always suggest that as an investor, it is best to diversify in order to reduce your risk. All I have to say is, "Shut up!". In my opinion, diversification is a positive strategy...if your investing in the 1950's that is. In our modern day trading environment, diversification bears a new name- Diworsification. That's right. Diworsification is the new term that applies to diversification because while diversification helps you reduce risk, it can also cripple your portfolio and prevent it from making substantial gains and returns on your investment. That's because the more positions you add, the more you are increasing your risk and the more you are decreasing your chances of scoring a nice gain on your winners (what are the chances that all the stocks you pick will be winners??). Instead, it is better to allocate most of your money in a few top stocks that are at a proper buy point instead of buying lots of different stocks hoping for winners. It is much easier to pick 2-3 winners than to pick 15 winning stocks. Adding extra stocks is unnecessary. Instead, continue to add to the 2-3 winning stocks and take advantage of pullbacks and bounces off key support levels and moving averages. I use another strategy. I like to buy a lot of stocks that I like. The thing is, I just buy a little bit at first (for ex, 50 shares). In the next couple of sessions, if the stock continues to perform well, I will add to it. If it doesn't look good anymore, I sell and minimize my losses. By doing this, I am continuously adding to my winners and letting go of my laggards. In the end though, you need to develop and stick to a strategy that works well for YOU.