In a recent study, Vanguard took a look at the last 30 years worth of data for the Russell 3000 index, which represents the total stock market. They found something remarkable - over the last 30 years, 47% of stocks were unprofitable investments and almost 30% lost more than half their value. They also found, and this is the big one, that 7% of stocks had cumulative returns over 1,000%.

But imagine how hard it would have been to identify that winning 7% and concentrate only on those holdings in advance? In his recent post, Michael Batnick takes Vanguard's data and looks at the long-term risk of trying to only hold a small amount of stocks, even if you have the conviction that they are the right stocks. Diversification has a much better track record than randomized collections of larger positions. 

What are the ramifications of this for portfolio construction? How about investment advice? Michael and Downtown Josh Brown sort it all out in a brand new Live from the Compound.

Read Michael's post here and see the charts for yourself: 

https://theirrelevantinvestor.com/2019/03/25/how-concentration-affects-portfolio-performance/

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https://www.amazon.com/Ritholtz-Wealth-Management-LLC-Compound/dp/B07P777QBZ

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http://ritholtzwealth.com/

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