Anthony Scaramucci, the founder of SkyBridge Capital, shared his thoughts on diversification, advising investors not to diversify if they are right.
Scaramucci: Don't Trade Apple Or Bitcoin For Mediocrity
Scaramucci, on his YouTube channel, used the example of Warren Buffett‘s investment in Apple Inc. (NASDAQ:AAPL) to explain his point. Scaramucci pointed out that when Apple became 50% of Buffett’s portfolio, he didn’t rush to diversify. Instead, he held onto his position, refusing to trade it for several smaller investments in the name of diversification.
“You don’t trade Apple for four scrubs and call it diversification,” Scaramucci remarked.
Scaramucci used a basketball analogy to further illustrate his point, quoting Buffet’s words from a ’90s annual report, “Well, in the name of diversification, I’m going to trade Michael Jordan for four mediocre basketball players. Is that what I’m doing?”
“There’s diversification and there’s diworsification,” explained Scaramucci.
He also gave the example of Bitcoin (CRYPTO: BTC), stating that if someone advises an investor to diversify their Bitcoin holdings, the investor should not feel pressured to do so. “The answer to that question is no, you don’t need to diversify.”
Scaramucci Echoes Charlie Munger But Dalio Differs
Scaramucci’s advice is in line with the investment strategies of other renowned figures. The late Charlie Munger, for instance, had a concentrated approach to investing, with his family’s entire portfolio consisting of just three major holdings. Munger, the vice chairman of Berkshire Hathaway (NYSE:BRK) (NYSE:BRK), was vocal about his approach, calling diversification a strategy for people who know nothing.
On the other hand, billionaire investor Ray Dalio has emphasized the importance of diversification in achieving investment success. Dalio, the former CEO of Bridgewater Associates, has highlighted diversification as the most important thing to do in order to invest well. His macroeconomic viewpoint has led him to concentrate on broader asset classes such as sovereign bonds and commodities.
Buffett himself has made some of the largest acquisitions during his time leading Berkshire Hathaway, indicating a profound diversification strategy. His biggest acquisitions highlight a strong focus on sectors such as utilities, railroads, insurance, and energy.
READ NEXT:
Image via Shutterstock
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
