Poor Charlie's Almanack: The Essential Wit and Wisdom of Charles T. Munger · chapter 3 · id poor-charlies-almanack-c3-01-a-competent-investor-should-ho

“A competent investor should hold a concentrated portfolio of 3-5 stocks rather than diversifying broadly, as supported by the Kelly Criterion.”

contestedconfidence: high✓ ZHP-verified + red-teamed

Receipts

Kacperczyk, Sialm & Zheng, 'On the Industry Concentration of Actively Managed Equity Mutual Funds,' Journal of Finance (2005)DOI registry: valid

More concentrated mutual funds outperformed diversified ones by about 1.5% per year on average.

Bessembinder, 'Do Stocks Outperform Treasury Bills?' Journal of Financial Economics (2018)DOI registry: valid

From 1926-2016, the entire net gain of the U.S. stock market was attributable to just 4% of listed stocks. 57.4% of individual stocks delivered lifetime returns less than one-month Treasury bills.

Markowitz, 'Portfolio Selection,' Journal of Finance (1952)source alive

Diversification reduces portfolio variance without proportionally reducing expected return. Most benefit captured with 20-30 stocks.

This claim is a stable, citable object. If you can falsify a verdict, tell us — corrections are loud here.