Collection: Mohnish Pabrai - #125 'Don't Focus On Being Fully Invested'

Video Link: https://youtu.be/4MCXNZ6ZARI

In this episode, Mohnish Pabrai was asked to share his thoughts on diversification in value investing. And how does he decide how much cash to keep on hand at a given time?

In this episode, you’ll learn:

  • Mohnish Pabrai on concentrated vs. diversified portfolio.

  • Mohnish Pabrai on how much cash to hold in portfolio.

To check out all Collection: Mohnish Pabrai <click here>



(Source: https://youtu.be/jfxOvdiac94)


How do you weigh your focus kind of value investing versus the desire to diversify your fund? My guess in a way, so if you only have 5-10 stocks at a certain time, do you still have the desire diversify across many industries?


Yeah, I don’t actually think about it that way, I just think about it from the point of view that, you know, what can I find that it’s worth investing in which I can understand, which is undervalued. And then if I can get more diversification, the portfolio without giving up much upside then I’m all for that. Sure, no problem.

So it just depends on, you know, what shows up. And you know what, so there’s not a lot of activity, there is not a lot of changes, so we tend to keep things for awhile. And so, we – I keep reading stuff and looking at things, and every once in a while, things make sense and then we can pull the trigger.


So to take advantage of these buying opportunities, you need cash. And so given the fact that you aren’t ready to sell something at that exact time and having cash on hand means you’re not making money. How do you decide how much cash to keep on hand at a given time?


Yes, so I think of the things about the Buffett-Munger model is that you don’t focus on being fully invested. You just focus on putting money to work if it makes sense to put it to work, and if it doesn’t make sense to put it to work, let it sit in cash.

So the ability to be comfortable with uninvested funds is part of that patience. So there’s nothing wrong with keeping cash if you don’t have anything intelligent to do with it, that’s perfectly fine.

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