SOHON - The Argument Against Diversification

• Diversification is the process of allocating capital to assets that we think will have lower returns than the one we think is the most promising.
• Too much concentration can lead to ruin, but if done right, can result in dramatically higher return growth.
• The Kelly criteria is a mechanism to concentrate a portfolio on just a few promising ideas while avoiding ruin.
• A concrete application of the principle to a lodging REIT security is explored.
• Applying the methodology to REITs more generally has yielded +96% returns over the last 6 months in a real money account.

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