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My Biggest Portfolio Mistake

Why too much of a good thing can turn bad.

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The late global-health expert Hans Rosling, in his book Factfulness (which I recommend for its entertaining and statistics-based account of the ways we misapprehend our world), commented that “everything you need to survive is lethal in high doses.” The same could be said of investing. The principle of diversification is in a sense predicated on this concept: While a given asset class, sector, country, fund manager, factor, or macro theme (to name just a few ways of slicing and dicing the investment opportunity set) may offer tantalizing prospects in the here and now, load up too heavily on that idea in your portfolio and you are likely to get burned at some point. 

I experienced this first-hand myself in what I consider the worst portfolio-based investing mistake I’ve made over my years as a fund investor. It was a long-gestating event, and one borne out of good intentions. Before explaining the error in full, I need to first cover a little history. It all started with Bill Miller. 

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Josh Charlson does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.