Diversify, but not too much (a.k.a. sniper vs. shotgun dilemma)

Sniper vs. shotgun

I’m currently reading a book on swing trading and the heading of one of the chapters reads: “Diversify, but not too much“. Which, of course, totally makes sense – on the one hand, you want to diversify your portfolio in order to reduce the risk (of losing money if any single company goes bust) and on the other hand you want to concentrate your resources (trading budget) on only a few stocks in order to be able to get some serious gains. Because, if you stretch your budget across a thousand stocks, you’ll probably be waiting for a long, long time until you see any noteworthy returns.

Now, I’ve been struggling with above topic a lot in the past. Albeit in a completely different sphere of life (before I even knew that investing or swing trading existed).

If you followed me on Instagram (@newlifeguru), you would have noticed that I don’t seem to be a very focused guy I have so many different fields of interest. Currently I’m into learning jazz guitar, self-improvement, yoga, spirituality, motivational quotes, entrepreneurship, stock markets, personal finance, investing and trading, taekwondo, fitness and learning Chinese. Oh, and healthy food & nutrition, too. Hm… and Buddhism. And recording audio books. And songwriting. Huh. Ok, I guess that about rounds it up. ๐Ÿ˜Š You see? A lot.

Oh, wait! Recently I also started learning Scratch 3 (but gave it up after realising that I’m fighting on too many battlefields already). And did I mention calligraphy? And Excel/VBA? No? Hm… add that to the above list, as well.

And here comes the sniper vs. shotgun dilemma: me being a “shotgun” type of person (many projectiles flying all over the place) – I figured that being a “sniper” type would have helped me achieve more in life. You know, focus on one thing and streamline all the energy and ressources into achieving that one “thing”, that one goal.

Sniper fires only one projectile, but it shoots very precisely and has a far reach. Chance of a sniper shot hitting bulls eye is huge. Aim. Fire. Bam!

A shotgun on the other hand spreads many projectiles in various directions: jazz guitar, learning Chinese, yoga, fitness, trading, calligraphy… You get to learn and enjoy so many things. Of course, it comes with a price tag attached: none of the shots has the impact of the sniper shot. I mean, each day has only so many hours and each of us has only a finite amount of money and energy. Therefore, if you channel all your efforts in a single endeavour, you’re more likely to succeed in that one endeavour. But… you have to chose one goal which implies that you must get rid of the rest. Yeah, that’s a real bummer, I know. And this is my biggest problem, too.

Getting rid of stuff and adopting a minimalist lifestyle was not very hard for me. The really hard part is getting rid of things you want to do in life, new things you want to learn, new experiences etc. I want all of the above mentioned. ๐Ÿ˜Š But I’m slowly realising I can’t have it all, at least not right now. And this is where my investing guru, my idol, my fellow investor, Mr. Warren Buffett steps in…

Warren Buffett’s 5/25 Rule

Dudes and dudettes (I’m addressing those of you who are like me, more of a “shotgun type”) – I think I found a solution for all of us: there is a strategy called 5/25 (which the Internet community attributes to Warren Buffett). This strategy is very simple, one just needs to follow these three steps:

1. List 25 important things you wish to do, experience, accomplish, learn in your life.

2. Now circle the 5 most important ones.

3. Focus all your ressources on those 5 and forget the rest (for the moment, at least).

Cool, no? I haven’t implemented it yet. But I’ll make sure to do so very soon! I’ll keep you posted.

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