One of the age-old questions in investing is how widely should we diversify. Unfortunately, it seems that even the best investors can’t seem to agree on this.

Legendary investor Charlie Munger is famous for being a supporter of a concentrated portfolio. He once said:

“The idea of excessive diversification is madness. Wide diversification, which necessarily includes investment in mediocre businesses, only guarantees ordinary results.”

In 2017, Munger said that he owned just three positions in his personal portfolio – Berkshire Hathaway, Costco, and an investment in Li Lu’s investment partnership (which itself is highly concentrated).

At the opposite corner, we have other renowned investors who practised wide diversification and yet still achieved stunning results. For example, there’s Peter Lynch, who earned a 29.2% annualised return in his 13-year tenure managing the Fidelity Magellan Fund from 1977 to 1990. In his later years managing the fund, Lynch held as many as 1,400 stocks in the portfolio.