Warren Buffet's advice was not always right for every investor

American investor and philanthropist Warren Buffett, the “Oracle of Omaha,” has finally announced his retirement.

As the curtain closes on one of the greatest investing careers of all time, it’s a good moment to reflect on some of the timeless (and sometimes controversial) wisdom he’s shared over the decades.

One of Buffett’s most famous contrarian takes was hat diversification of investment portfolios isn't all it’s cracked up to be.

“Diversification is protection against ignorance,” he once said. “It makes little sense if you know what you are doing.”

For Buffett, the best strategy has always been to go all-in on a few well-understood, high-conviction investments—think Coca-Cola, American Express, and more recently, Apple. He believed that too much diversification waters down returns and reflects a lack of deep knowledge.

But ,here’s the thing, you are not Warren Buffett. And that’s not an insult, it’s reality.

The Buffett exception

Buffett is an anomaly. He’s spent the better part of a century reading financial statements for fun, analyzing economic moats like a grandmaster,and running a company with a research team of elite investors. He could probably tell you the free cash flow of Dairy Queen off the top of his head while eating a Blizzard.

For him, concentrating investments in a few companies made sense because he had the tools, patience, temperament and access to information most investors simply don’t have. The odds of the average investor picking three to five companies that outperform the market over the long term—without blowing up along the way—are pretty slim.

So while Buffett could afford to put billions into a handful of names, for most of us, doing the same is a little like walking a tightrope without a net—blindfolded.

Diversification— Boring but beautiful

For the average investor, diversification isn’t a weakness, it’s a wise defence. It helps protect your portfolio from the risk if one company, sector or even a country goes sideways.

With diversification, you don’t have to be an expert stock picker. You can invest in a broad index fund or ETF that gives you exposure to hundreds or thousands of companies across industries and geographies. It’s simple, low-cost and historically effective.

In short, diversification is how you admit you’re not Warren Buffett and you win anyway.

But what if I do have a hunch?

Let’s say you’ve done your homework. You believe deeply in a few companies.You’ve read the earnings reports, followed the management team and understand the business model. That’s great.There’s room for that too.

Many smart investors use what’s called a core-satellite approach,

• Core: 80%-90% of your portfolio is broadly diversified in index funds or ETFs.

• Satellite: The remaining 10%-20% is reserved for your “high-conviction” bets—maybe that EV company you believe will change the world or the Canadian tech firm you’ve been following since its IPO.

That way, you get the best of both worlds—the steady growth and risk management of diversification, with just enough room to channel your inner Buffett.

Warren Buffett’s advice is legendary—but even he would likely agree that what works for him doesn’t work for everyone. In fact, he’s often said that most people are best served by simply investing in a low-cost S&P 500 index fund and leaving it alone.

So, go ahead, tip your cap to Buffett. Learn from his brilliance. But remember, you don’t need to be a billionaire stock-picker to build long-term wealth. You just need a plan, a little patience and yes, a well-diversified portfolio.

Because while there may only be one Warren Buffett, there are millions of successful investors who got there a much more boring (and safer) way.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.