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#189 Chris Davis: Three Generations of Wealth

The Knowledge Project with Shane Parrish

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Guiding Principles for Investment Success

To achieve above-average investment performance, it is crucial to avoid certain pitfalls identified by a prominent investor. Firstly, avoid making group decisions, as they can lead to diluted accountability and innovative thinking. Secondly, steer clear of the tendency to conform portfolio strategies to those of other well-regarded firms, which often stifles personal judgment and unique opportunities. Thirdly, be aware of the asymmetry between risk and reward—accepting that conventional failures are often more palatable than unconventional successes can inhibit bold decision-making. Fourthly, refrain from over-diversification; while diversification reduces risk, excessive diversification can limit returns and compromise focus. Lastly, combat inertia, which can prevent timely responses to market changes or new information. By consciously avoiding these five factors, investors can position themselves for greater long-term success.

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