You’ve heard it a million times: “Don’t put all your eggs in one basket.” It’s the golden rule of investing, preached as the ultimate way to stay safe.
What if I told you this “safe” advice is a trap? What if it’s the very thing watering down your returns and preventing you from building real wealth?
This is the concept of “Diworsification“
The Problem With Owning Everything 😵
Imagine you’re a gardener. If you plant five types of vegetables you love, you can give each one the perfect amount of water, sunlight, and care. You’ll know them inside and out.
Now, imagine trying to manage a garden with 100 different plants. Can you really be an expert on all of them? Of course not. You’ll end up neglecting your best plants while wasting time on the weaker ones.
Investing works the same way. Owning 50 or 100 different stocks doesn’t make you safer. It just guarantees that you don’t really understand what you own. True risk isn’t volatility; it’s not knowing what you’re doing.
Think Like Warren Buffett 🧠
Warren Buffett has a brilliant mental model. He tells investors to imagine they have a punch card with only 20 slots on it for their entire life.
Every time you make an investment, you punch a hole.
With only 20 chances, would you waste a punch on your 50th best idea? No! You’d save it for an absolute superstar, a company you understand deeply and believe in passionately for the long run.
This is why Buffett made huge, concentrated bets on companies like Coca-Cola and Apple. He did the hard work, gained conviction, and then invested meaningfully.
How to Invest With Conviction ✨
This isn’t about being reckless. It’s about being intentional. Instead of spreading your money thinly across dozens of stocks you barely know, focus on finding a small number of truly wonderful businesses.
Here’s a simple way to think about it:
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Become an expert: Aim to own between 5 to 15 companies that you can understand inside and out.
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Focus on quality: Only buy businesses with a strong, lasting advantage.
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Make your best ideas count: When you find a winner, don’t be afraid to let it be a meaningful part of your portfolio.
Stop playing not to lose. True wealth is built by playing to win, and that means backing your best ideas with conviction.
How many stocks do you think is the perfect number to own? Share your thoughts in the comments!
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