Page 181 - Rich Dad's Increase Your Financial IQ: Get Smarter with Your Money

I decided the best way to beat the A students, the rich kids, the teachers
who labeled me average, and the girls who were not interested in me was to

become rich. I was not angry with them. I was just tired of being average. I
realized I could become richer than most people because when it came to
money, most people were following below-average financial strategies and
advice.

Why Do Experts Recommend Diversification?

As Warren Buffett says, “Diversification is a protection against ignorance.
[It] makes very little sense for those who know what they are doing.”
Buffett also said about money managers, “Full-time professionals in other

fields, let’s say dentists, bring a lot to the layman. But in aggregate, people
get nothing for their money from professional money managers.”
I believe that when many recommend diversification, it is simply a
protection against their ignorance. I suspect Buffett is saying that it’s below-

average financial advice from below-average advisors for below-average
investors.
Warren Buffett has a different financial strategy. He doesn’t diversify. He
focuses. He looks for a great business at a great price. He doesn’t buy a lot

of businesses and pray one of them does well. He doesn’t want average
returns, or to play the stock market. He likes to control the company, but not
run the company. When Warren talks about investing, his key words are
intrinsic value, not diversification.

One reason financial advisors recommend diversification is that they
cannot find great companies. They do not have control, and most don’t
know how to run a business. They are employees, not entrepreneurs like
Warren.

Smart Guys Fail

On August 24, 2007, after the market crash, the Wall Street Journal ran a
story about how quantitative funds (quants), supposedly managed by some
of the smartest guys on Wall Street, all lost money (Justin Lahart, “How the