How come investors like Warren Buffett, Georges Soros, Jim Rogers, Carl Icahn and Stanley Druckenmiller became so succesful and the average investor not? Stanley Druckenmiller’s quote beneath says it all.

Everywhere you read something about investing, they recommend you to diversify. But when you look at the portfolio of these super investors, you see they are invested in just a few companies. Why put any money into anything else when you have one really, really good idea?

This is what Stanley Druckenmiller said in a speech he gave at the Lost Tree Club back in January:

I think diversification and all the stuff they’re teaching at business school today is probably the most misguided concept everywhere. And if you look at all the great investors that are as different as Warren Buffett, Carl Icahn, Ken Langone, they tend to be very, very concentrated bets. They see something, they bet it, and they bet the ranch on it.

The mistake I’d say 98% of money managers and individuals make is they feel like they got to be playing in a bunch of stuff. And if you really see it, put all your eggs in one basket and then watch the basket very carefully.

Of course, super investors like Stanley Druckenmiller can afford the time and effort to do research and wait untill the right opportunity passes by. The reason phenomenal investors are able to forego diversification like this is because their skill set is different.

This requires both knowledge and experience. The second step is trusting your knowledge and experience when you find a high confidence idea. This is explained by a quote from Jim Rogers:

One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do… I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up.

The average investor should be diversified to protect them from their own lack of investing skill. But when you become skilled and experienced like a super investor, you can wait a trade opportunity so compeling that you simply can’t resist.