TRUE VALUE INVESTORS DO NOT OVER-DIVERSIFY, NOR WORRY ABOUT FLUCTUATIONS

​Investors should limit themselves to researching companies where they have an edge, and they have time and knowledge to ensure each company passes all the tests of prudent value investing.  If you are only going to take on shares where you have devoted enough time to have a complete grasp of the company’s situation, eight to twelve companies is probably the most that a part-time stock-picker could follow.
All shares in the portfolio have to pass some stiff tests and you will not know if they pass the tests unless you spend time analysing them.  The private investor will lose the analytical edge over the professionals if he/she spreads intellectual resources thinly.
Even a portfolio of 8 – 12 shares requires a lot of work if you are to spot new opportunities and not let the portfolio atrophy: `I’ve always believed that searching for companies is like looking for grubs under rocks:  if you turn over 10 rocks you’ll likely find one grub; if you turn over 20 rocks you’ll find two’ (Peter Lynch)
Accept Fluctuation
The investor must accept that the stock market fluctuates.  Peter Lynch said that, despite learning in graduate school that the market goes up 9% a year he found it impossible to predict, nor could.​…To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

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