- 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.
For further details see:
The Argument Against Diversification