⛏ Deworsefication

Greetings Contrarian,

Here's another Agony Aunt letter that we're sure you'll enjoy.

Dear Anonymous Punter,

Alright, we tend to think that a balanced portfolio is a worthwhile target. Let us play around with the possibility that it may not be. Balance, by definition is a diversification of assets in order to either maximise moves in different “themes”, ie to curb FOMO, or to defend oneself from a downward move in your main portfolio theme.

Now ask yourself, under which circumstances would you do that? One very reasonable answer would be that you don’t fully have confidence in what you do own. Then it begs the question, why hold the stocks you’re not so sure of?

We prefer to make sure that each individual stock deserves a place on our portfolio, and once it doesn’t anymore, it gets sold. If the price is better, we buy more (it's painful, we know).

By diversifying your portfolio in uranium, gold, silver, etc. while keeping it all in mining stocks barely makes the cut as true diversification. It may be, as Warren Buffet puts it, de-worse-ifying.

On the other hand, defensive action may come in one’s general net worth construction. A bit of stock, a bit of real estate, a bit of business interest and a couple of different currencies and some gold may go a long way. Multiple streams of income will go a long way.

Most importantly we find that being ruthless about what you own is a better strategy than putting hard limits on percentages of ownership. Going all in on one stock, unless you have lots of control on the outcome of that company, however, is pure madness. Don’t do it unless you want a riches to rags story.

A good portfolio review every now and again to see which stocks are still deserving of your portfolio will go much farther than random proportions. It’s difficult, but it should be done.

Happy speculating!

The Editor

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational/entertainment and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.