Use access key #2 to skip to page content.

"buy and hold is a crock of sh-t" and "diversification, that's for idiots."

Recs

18

August 13, 2011 – Comments (10)

Cuban On Investing: Diversification Is For Idiots

Mark Cuban gives some great advice in an interview with the Journal's Alan Muray, including "buy and hold is a crock of sh-t" and "diversification, that's for idiots."

Investors should stick to cash unless they've got a really smart investment:

"When I started trading stocks in the early nineties after I sold my first company, you could understand elements of the market better than the professionals. I could understand new technology -- Wellfleet, Synoptics and all these old technology companies -- better than the traders. Today there's so much money in these huge hedge funds and they have such professional research and in-depth research, there really aren't any advantages for the individual traders. My approach has always been unless I know something specific, put it in cash."

Recently Cuban has bought up crushed mortgage-backed securities and Aussie bonds as a way to play China.

"All that asset management, diversification, that's for idiots. You can't diversify enough to know what you're doing. I did my homework on Australia, I did my homework on [mortgage backed securities] and I knew their pricing had gotten crushed."

This week Cuban has a lot of money in cash. He also bet on volatility by buying index calls when the market tanked and puts when the market surged.

"I don't think stocks have fallen enough to say any particular stocks are cheap."


Read more: http://www.businessinsider.com/cuban-on-investing-diversification-is-for-idiots-2011-8#ixzz1UxZ1KEn3

 

10 Comments – Post Your Own

#1) On August 14, 2011 at 12:47 PM, ETFsRule (99.94) wrote:

Great stuff. Investors should always be careful to avoid diworsification. The Motley Fool coined that term, if I'm not mistaken.

Report this comment
#2) On August 14, 2011 at 12:59 PM, GVinvesting (98.81) wrote:

Maybe he should take another look at Australia

Report this comment
#3) On August 14, 2011 at 1:17 PM, pedorrero (< 20) wrote:

Even a crock of s**** might be a good investment, at the right terms.   Consider that bat guano and birds*** are both commodities (fertilizer among other things.)The main kind of s*** to beware of is the bulls**** that passes for knowledge, especially the self-generated kind (more commonly called "overconfidence.")  Want to see the biggest danger to wealth?  Look in the mirror.

Report this comment
#4) On August 14, 2011 at 1:22 PM, TicoHombre (< 20) wrote:

 So your answer is to become day traders?

Sorry, the view is wrong.  I don't have the time or the desire to argue it.  There are plenty of millionaires and some billionairs who can do that better than I.  Most last week was a good example of buying & holding as well as diversification.  You couldn't effectively trade last week unless you sat in front of a computer for 5 days monitoring every ebb and flow.  I refuse to do that.

Report this comment
#5) On August 14, 2011 at 2:39 PM, torpex77 (< 20) wrote:

Well, putting most your savings in cash is a great option if you already have all the cash you will ever need.

 

Report this comment
#6) On August 14, 2011 at 3:37 PM, TruffelPig (< 20) wrote:

Who says stuff in such words doesn't deserve my respect. BTW, Buffet is buy and hold. 

Short term can always be a big failure, long term less likely because time can heal nearly all wounds as long as one buys profitable companies. Diversification minimizes risk.

The best strategy is probably to buy good companies whenever there is a drop in the market. When you buy at 1100 S&P it is very likely that you are below that value max. for a year or two or so in case of a bad market drop.  

Report this comment
#7) On August 14, 2011 at 4:08 PM, DaveGruska (96.46) wrote:

ETFsRule

Peter Lynch actually used the term in "One Up On Wall Street" written in the late 80's. Not sure if he made it up or not.

Report this comment
#8) On August 14, 2011 at 4:15 PM, KommanderKhaos (68.32) wrote:

Well it seems like he's referring to traders there as opposed to investors, especially when he says "there aren't really any advantages for the individual traders".

At any rate, Mark Cuban is about a wicked blowhard and drama queen, so I wouldn't really put any credence to whatever it is he might say, and I CERTAINLY wouldn't use that as a guideline or philosophy regarding investing, anymore than I would for another world-class blowhard and drama queen in Donald Trump. 

Report this comment
#9) On August 14, 2011 at 4:43 PM, truthisntstupid (94.07) wrote:

The crap you guys will rec will never fail to amaze me.

Report this comment
#10) On August 15, 2011 at 12:11 PM, ETFsRule (99.94) wrote:

TruffelPig (< 20) wrote:

"Who says stuff in such words doesn't deserve my respect. BTW, Buffet is buy and hold."

If you listen to the interview, he talks about Buffet and explains why he doesn't think Buffet's investing style will work for the average investor.

streeter123:

Thanks. I think I'm remembering it from a MF book from the mid-90's - they probably got the term from Lynch.

Report this comment

Featured Broker Partners


Advertisement