On Stock Portfolio Diversification
Warren Buffet and Ray Dalio go head to head to see who's investing philosophy is better.
Buffet is on the side of "Value Investing", taught to him by Benjamin Graham many years ago. This style of investing has allowed Buffet to average around a 20% return for over 60 years straight. His track record has attracted many to adopt his style of investing including Bill Ackman and Bill Gates. I would argue that this style of investing is likely our best chance to beat the markets as a solo-investor. Although in recent years many argue his style of investing no longer holds up to the fast pace of technological innovation. I believe his lower returns (relative to himself) as of late are more likely due to the sheer size of his portfolio, where any investment he makes must have a huge amount of liquidity to accommodate any meaningful difference for him.
Contrasting with Buffet we look at Ray Dalio's more institutional style of investing: heavy diversification across uncorrelated assets/commodities. This kind of investing is considered safer and more widely accepted as the "proper" way to invest. Dalio no longer directly manages the Bridgewater Associates hedge fund, so to associate their recent returns directly to him is not exactly fair, but his philosophy is very much still inculcated into the style Bridgewater deploys.
It should also be noted that, aside from Buffet and maybe Ackman, these stock portfolios are only a segment of these people's total investable assets. Even still it is interesting to see two distinct approaches in the public stock market.
And all of this just to not beat the S&P 500. Wow!
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