Charlie Munger On Diversification -- Another Worn-Out Meme -- August 3, 2023

Locator: 45311INV. 

Munger on diversification. 

His example:

Munger went on to share a story from the 1930s about a wealthy widow who invested $300,000 in just five stocks, including General Electric Co., Dow Inc. and DuPont. By the time she died in the 1950s, her wealth had grown to $1.5 million without incurring costs or expenses.

GE? Her heirs were lucky she died in the 1950s. Hopefully, her heirs got out of GE. My hunch: they did not.

Meanwhile, this in reply to Charlie:

So Charlie's example of a widow making 5x her money in 20 years from the depression low 1930s to a post-war high in 1950s equals to a 8.4% annual return.

With regard to BRK: diversification, according to the linked article, is "qualified." BRK owns shares in a hundred (?)) different companies, many of them Japanese, and then another hundred or so companies owned outright, like BNSF, Geico, See's Candy.

And that story of the widow -- I wonder what her $300,000 was worth before the panic and the depression. My hunch: she inherited her money from her husband who knew what he was doing and then she just HOFDL.

More.

For diversification, these same guys recommend index funds and ETFs.

Here's "QQQ" and this is just the 54 or so; I believe the entire ETF has more than 100 ticker symbols: