Bill Ackman advocates for concentrated portfolios over diversification, but retail investors should prioritize diversification.

From Yahoo Finance: 2025-06-12 11:10:00

Billionaire Bill Ackman’s fund, Pershing Square Capital Management, holds only around a dozen stocks. Ackman believes diversification is for “lazy” investors who haven’t done enough research, contrary to common retail investor practices. Is a concentrated portfolio like Ackman’s the best move for most investors, or is diversification a safer bet?

Ackman and Warren Buffett both emphasize the importance of in-depth research and conviction in investing. They argue that overdiversification can dilute returns and cover up ignorance. Retail investors, lacking professional resources, should opt for diversification to mitigate risks and improve long-term performance in the market.

Professional investors like Ackman and Buffett can afford to take higher risks with concentrated portfolios, but the average retail investor should prioritize diversification. Retail investors often lack the time, resources, and expertise to effectively manage a concentrated portfolio, making broad market exposure through ETFs or index funds a more suitable choice.

Historical data shows that long-term investing and diversification can lead to better performance and reduced risk. Retail investors should consider spreading their investments across various sectors and companies to safeguard against significant losses. Additionally, experts recommend a balanced approach to investing for financial security and growth.

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The Motley Fool emphasizes a disclosure policy for transparency and credibility in financial content. To explore more insights on concentrated portfolios, diversification strategies, and investment recommendations, read the full article on Bill Ackman’s critique of “lazy” investors and the debate on optimal investment approaches.

Read more: Is a Concentrated Portfolio the Right Move for Most Investors?