Concentration or diversification ?

A lot of time an individual investor says (1) “X” is fundamentally sound stock, (2) on “Y”, I have the highest conviction. After analyzing the “X” and “Y”, I got to know, the individual investor is unaware of many things and has poor research quality which is reflected in his/her sub-optimal/garbage high conviction stock “Y” selection.

So, everyone is not trained to do this particular job. Did he/she invest time to learn the stock selection skill properly? Most of the time, the answer is no.

For a pro-investor, concentration is good, otherwise, start from diversification and as time passes, the individual investor becomes confident/ successful to validate their high conviction is really paying them, then slowly move to concentration.

One needs to know the competitive advantages, cyclicity, commodity vs specialty, different sector leader and player and their gameplan. Those power comes with time and experience and reading. Till then controlled diversification with 15-20 stocks and several sectors is safe choice.