Cuban On Investing: Diversification Is For Idiots

Mark Cuban gives some great advice in an interview with the Journal’s Alan Muray, including “buy and hold is a crock of shit” and “diversification, that’s for idiots.”

Investors should stick to cash unless they’ve got a really smart investment:

“When I started trading stocks in the early nineties after I sold my first company, you could understand elements of the market better than the professionals. I could understand new technology — Wellfleet, Synoptics and all these old technology companies — better than the traders. Today there’s so much money in these huge hedge funds and they have such professional research and in-depth research, there really aren’t any advantages for the individual traders. My approach has always been unless I know something specific, put it in cash.”

Recently Cuban has bought up crushed mortgage-backed securities and Aussie bonds as a way to play China.

“All that asset management, diversification, that’s for idiots. You can’t diversify enough to know what you’re doing. I did my homework on Australia, I did my homework on [mortgage backed securities] and I knew their pricing had gotten crushed.”

This week Cuban has a lot of money in cash. He also bet on volatility by buying index calls when the market tanked and puts when the market surged.

“I don’t think stocks have fallen enough to say any particular stocks are cheap.”