The Little Book That Beats the Market (Little Books. Big Profits 8)

by Joel Greenblatt

in varying industries would qualify as prudent behavior. At least, that’s the view I take with my investment portfolio. The more confidence I have in each one of my stock picks, the fewer companies I need to own in my portfolio to feel comfortable. Most investors view stocks and the construction of stock portfolios differently, however. Somehow, when ownership interests are divided into shares that bounce around with Mr. Market’s moods, individuals and professionals start to think about and measure risk in strange ways. When short-term thinking and overly complicated statistics get involved, owning many companies that you know very little about starts to sound safer than owning stakes in five to eight companies that have good businesses, predictable futures, and bargain prices. In short, for the few who have the ability, knowledge, and time to predict normal earnings and evaluate individual stocks, owning less can actually be more—more profits, more safety . . . and more fun!