Jim Rogers: Why (maybe) you should diversify

I've also written about the importance of diversification to reduce risk in your portfolio. As the saying goes, don't put all your eggs in one basket. But you also need to make sure they're not all on the same egg truck, either.

Diversification can limit the risks that are specific to a company or industry. For example, bad (or fraudulent) company management is a firm-specific risk. An airline employee strike, which has an industry-wide impact, is an industry risk. These are called "diversifiable risks" because they aren't directly related to the broad financial market system.


Market risk (also called "systematic risk" because it relates to the financial system as a whole) is unavoidable for anyone investing in financial markets. Market risk is affected by things like interest rates, exchange rates and recessions. Diversification can't touch market risk.

The graph below shows these two types of risk. Every investor is subject to systematic risk. Diversifiable risk is higher if a portfolio includes a small number of holdings. And diversifiable risk declines as the number of holdings in a portfolio increases - to a certain point. Having a portfolio with five securities definitely beats a portfolio of just one security. But diversifying beyond 30 securities doesn't bring any additional benefits in reducing overall portfolio risk.

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But Jim Rogers disagrees. "The expression on Wall Street is, don't put all of your eggs in one basket. Ha! You should put all of your eggs in one basket," he told me. "But be sure you've got the right basket and make sure you watch the basket very, very carefully."

Now, of course this strategy of putting all your eggs in one basket… but making sure it's the right basket, is not for everyone. It's a high risk, high reward strategy.

And Jim acknowledges that. "If you don't get it right, you're going to lose everything. But if you get it right, you're going to get very rich. And by the way, don't think it's easy getting it right. It's not easy. It takes a lot of insight and work and everything else. But, if you get it right, you'll be very rich."

- Source, Business Insider

Jim Rogers explains why you shouldn't diversify your portfolio too much

Diversification is generally considered one of the basic tenets of investing and financial planning. Owning a mix of assets, ideally with a low correlation - including, stocks, bonds, real estate and gold, for example - is Investing 101.

That is… unless you're one of the world's most famous investors. Jim Rogers, who I've written about recently (see here, here and here), is not a fan of diversification…

Jim doesn't buy into the cult of asset allocation

"Well, I know that people are taught to diversify. But diversification is just that's something that brokers came up with, so they don't get sued," Jim told me recently when I sat down to chat with him here in Singapore. Then he added, "If you want to get rich… You have to concentrate and focus."

This obviously goes against conventional thinking. But this kind of thinking is what made Jim one of the world's most successful investors. He co-founded the Quantum Fund - one of the world's most successful hedge funds - which saw returns of 4,200 percent in ten years.

He quit full-time investing in 1980 and went on to travel the world a few times. He also wrote several books about what he saw and learned. Even if you're not a travel or money junkie and know little about finance, these are some of the most educational and entertaining books you'll ever read about investing.

- Source, Business Insider

Jim Rogers: South Korea’s Bright Spot

Jim Rogers, the 75-year-old globe-trotting chairman of Rogers Holdings, reckons that South Korea could be a bright spot in an otherwise grim-looking financial landscape. And it’s all thanks to its troublesome neighbour to the north.

Rogers is convinced that North Korea will open up for business with the rest of the world. “The last time I visited the North, I went to market and there were hundreds of stalls,” he tells The Korea Times, “selling everything you can imagine. So they know how to be entrepreneurs.” And if North Korea does open up, then this will provide huge opportunities for South Korean businesses, he told investors at a talk in Seoul. North Korea offers “disciplined, educated, very cheap” labour and plenty of natural resources, while South Korea can provide “capital, management ability, and expertise”. A combination of the two could make South Korea “the most exciting country in the world over the next ten to 20 years”.

It’s a good thing that Rogers is so upbeat on at least one market, because he is otherwise downbeat. “Since 2008, debt everywhere has gone up a lot.” China in particular is in no position to repeat the huge monetary stimulus that helped to pull the world out of the worst phase of the financial crisis in 2008/2009. “Ultimately we are going to have a very serious bear market and economic dislocations… it is going to be the worst in my lifetime,” he said, echoing warnings he has made previously.

- Source, Money Week

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Jim Rogers: The Most Bullish Markets and Assets Right Now

Do you still see a rout in the making in world markets?

The next one is going to be the worst correction in my lifetime. In 2008, we had a problem because of too much debt, but now the debt in the world is much, much worse. Next time, its going to be much worse when we have such an economic problem.

In 2007, when Iceland went bankrupt, nobody had ever heard of it. Then it was the Lehman Brothers that went bankrupt. It was then that people knew that there was a problem. We are not looking at the small things.

Many Indian banks have a problem, and people are not paying much attention to it. There have been bankruptcies in China. Some things can happen, but we don’t know when. I do know we are closer.

Which asset class are you most bullish on? What are you bearish on?

I am most bullish on probably agriculture commodities, Russian government bonds in roubles, Chinese shares, Japanese shares. Some of these assets are depressed and have a chance to rise.

I am most bearish on FANG (Facebook, Amazon, Netflix and Google, which is now Alphabet) stocks in America. They cannot skyrocket from here. They are certainly turning into a bubble. Just because I said I am not optimistic, doesn’t mean I am going to sell them short, because bubbles really do strange things.

Which lesser-known markets have the potential to make it big?

Zimbabwe could be one. It has been a disaster for some years. We are going to have a new government next week. Colombia is very exciting, too.

- Source, Live Mint

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Still not invested in Indian market, missed it, says Jim Rogers

Indian markets are at a record high. What’s your take? Did you invest in India after exiting in 2015?

No. I have not invested in the Indian markets. I should have, everybody should have, but I have missed it. I don’t like to buy anything at all-time highs. So, I am doing nothing. I am watching. I am not going to jump onto a moving bus, because if you do so, you only get hurt.

There is a lot of easy money in the world, especially in India, and it is going into the market. That is always worrisome, because when the rest of the world starts having problems, India will have a problem, too.

What do you think of the ongoing trade war situation? What could be the likely outcome?

Something is going to happen to make it sound better. Mr Trump or somebody will put together something that will sound good. But next year, or the year after, when economies around the world have a problem, that is when he (Trump) is going to lash out and have a real trade war, and that will make the next economic problem even worse.

- Source, Jim Rogers via Live Mint

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