FundManagerZech @FundManagerZech: "🧠 Smart Investors Don’t Chase..."

Australia

Edited

🧠 Smart Investors Don’t Chase Luck – Here’s What They Do Instead, Diversification🧠 ______________________________________________________ 𝐓𝐋;𝐃𝐑 📌 - Bullish on DAC after earnings, but keeping single stock exposure capped. - Adding INSW instead for diversification within the same sector. - Diversification isn’t just holding multiple stocks—it’s about reducing correlated risks. - Cap single stock exposure at 10% to protect against unexpected events. Macro themes can have larger allocations, but spread across multiple stocks. - Patience is key—some picks may lag despite the broader trend being right. - Long-term survival > short-term gains—staying in the game matters more than chasing quick returns. ______________________________________________________ $DAC (Danaos Corp) our biggest position, just announced earnings, and after listening to the earnings call I am more bullish. However, I have a cap on single stock exposure so i can't add more. I will be adding $INSW (International Seaways Inc) instead because it is in the similar sector with different business models and avoids single stock risk. Here are my thoughts on diversification:This post is a way to reflect on my approach and ensure I’m making the right choices. Diversification means different things to different people. But at its core, it comes down to one key question: 𝗪𝗵𝗮𝘁 𝗶𝗳 𝗜’𝗺 𝘄𝗿𝗼𝗻𝗴? 🧐 🏆 𝗖𝗼𝗻𝗰𝗲𝗽𝘁 𝟭: 𝗧𝗵𝗲 𝗣𝗼𝘄𝗲𝗿 𝗼𝗳 𝗨𝗻𝗰𝗼𝗿𝗿𝗲𝗹𝗮𝘁𝗲𝗱 𝗕𝗲𝘁𝘀 I follow Ray Dalio’s principle of holding 5–10 uncorrelated bets. The key is uncorrelation—if one bet fails, others can still thrive. If you’re wrong, what happens? This can be at a sector level or a country level. 🔴 Owning Solana, $BTC (Bitcoin) Bitcoin miners, and Coinbase isn’t diversification. They’re all tied to crypto market sentiment. If one falls, they likely all do. 💚 True diversification means spreading risk across different economic drivers, not just different stocks. 📊 𝗖𝗼𝗻𝗰𝗲𝗽𝘁 𝟮: 𝗠𝗮𝗰𝗿𝗼 𝗧𝗵𝗲𝗺𝗲𝘀 𝘃𝘀. 𝗦𝗶𝗻𝗴𝗹𝗲 𝗦𝘁𝗼𝗰𝗸 𝗥𝗶𝘀𝗸 With individual stocks, being wrong can mean losing everything. I’ve seen big companies like Enron, Wirecard, and Lehman Brothers collapse completely. ⚡ Even if you get the macro trend right, factors like sanctions, regulations, or economic instability can wipe out a single company. 🔒 That’s why I cap my exposure at 10% per stock—it protects against overconfidence. 📈 However, I don’t limit exposure the same way for macro themes. If I believe China is undervalued, I’m comfortable with 25–30% exposure, but across multiple stocks (EVs, SOEs, industrials). 🔎 I’ll concentrate at a macro level, but not at the single stock level. 🎨 𝗖𝗼𝗻𝗰𝗲𝗽𝘁 𝟯: 𝗔𝗰𝗰𝗲𝗽𝘁𝗶𝗻𝗴 𝗟𝗼𝘄𝗲𝗿 𝗥𝗲𝘁𝘂𝗿𝗻𝘀 (𝗙𝗼𝗿 𝗡𝗼𝘄) Despite my strong China exposure, returns have lagged expectations. 🏆 Some picks have performed well – $Baba $9988.HK (Alibaba Group Holding Ltd (Hong Kong)) Xiaomi 🚫 Some haven’t – China Railway, for example 😬 It’s frustrating because the macro view is correct, yet not all stocks have reacted the same way. I know patience is key, and in time, the market should catch up. But let’s be honest—who wouldn’t love a quick win? 🤔 𝗙𝗶𝗻𝗮𝗹 𝗧𝗵𝗼𝘂𝗴𝗵𝘁𝘀: 𝗦𝘂𝗿𝘃𝗶𝘃𝗮𝗹 > 𝗠𝗮𝘅𝗶𝗺𝘂𝗺 𝗥𝗲𝘁𝘂𝗿𝗻𝘀 Even though diversification has slowed returns in the short term, I ask myself: 🔍 If I manage a large amount of my net worth in stocks, does it make sense to put 25% into just one stock unhedged? knowing unknown risks exist? For standing out in a world like eToro where returns gets the most attention, this approach might seem necessary. You might even be lucky for a long time and be able to sustain it. 🌐 But over a long enough period, luck runs out. I’m not investing just for a few years—I plan to stay in the game for 30+ years. That means buying what makes sense, staying disciplined, and managing risks smartly. 🤝 𝗦𝗼𝗺𝗲𝘁𝗶𝗺𝗲𝘀, 𝘁𝗵𝗲 𝗺𝗼𝘀𝘁 𝗶𝗺𝗽𝗼𝗿𝘁𝗮𝗻𝘁 𝘀𝘁𝗿𝗮𝘁𝗲𝗴𝘆 𝗶𝘀𝗻’𝘁 𝗮𝗯𝗼𝘂𝘁 𝗰𝗵𝗮𝘀𝗶𝗻𝗴 𝘁𝗵𝗲 𝗵𝗶𝗴𝗵𝗲𝘀𝘁 𝗿𝗲𝘁𝘂𝗿𝗻𝘀—𝗶𝘁’𝘀 𝘀𝗶𝗺𝗽𝗹𝘆 𝗮𝘃𝗼𝗶𝗱𝗶𝗻𝗴 𝗯𝗶𝗴 𝗺𝗶𝘀𝘁𝗮𝗸𝗲𝘀 𝗮𝗻𝗱 𝘀𝘁𝗮𝘆𝗶𝗻𝗴 𝗶𝗻 𝘁𝗵𝗲 𝗴𝗮𝗺𝗲. _________________________________________________