For years, I thought I was following legendary investor Warren Buffett’s advice.
I was certain the Oracle of Omaha said: “Put all your eggs in one basket, and then watch that basket.”
To write this article, I looked for the source. I assumed it was in an annual report from the 1980s.
It turns out the quote is older than Buffett. Industrialist Andrew Carnegie shared this idea in the 1880s.
Over the years, Buffett said similar things. He often speaks about diversification. In his opinion, diversification is important if you don’t know how to analyze businesses.
He adds that diversified portfolios will help you achieve average returns. Average is good enough for many investors.
Retirement fund managers, for example, seek average gains. Diversifying provides them with job security.
Great fortunes, Buffett notes, are built on one business, though.
Carnegie is an example of that. In the 1800s, he ruthlessly created one of the world’s greatest fortunes from Carnegie Steel Co.
In current dollars, he had an estimated net worth of $350 billion.
Carnegie never diversified. He put 100% of his eggs in the steel business.
When he sold his company, he again eschewed diversification. He took his profits in cash and bonds with guaranteed income.
At that same time, businessman John D. Rockefeller put all his eggs in oil.
Modern examples include Jeff Bezos’ Amazon and Bill Gates’ Microsoft.
There are many other examples of fortunes that came from one basket. Yet many investors diversify, giving up any chance of great wealth.
That’s a mistake. If you want Carnegie-style wealth, it’s best to follow Carnegie’s advice by using one simple strategy…
Boost Your Returns and Decrease Risk With Options
In my new service, One Trade, my readers put their eggs in one basket and watch the basket closely.
The basket is the SPDR Dow Jones Industrial Average Exchange-Traded Fund Trust (NYSE: DIA). Because I watch it closely, trades are open an average of two days.
To target large gains, I trade options on DIA.
Call options benefit from short-term price gains in the Dow. Put options profit from brief declines in the index.
In practice, options can deliver large returns and decrease risk.
And my unique trading system lets me know whenever the market has at least a 75% probability of going up or down.
The Results Are In
Instead of describing the theory of One Trade, let me focus on the results.
Since January 1, this account gained 66.5%. The Dow lost about 3.5% over that time.
I shared this strategy with some subscribers for a few months. Here’s what a few of them had to say:
“Michael, thank you so much. I exited DIA with a 37.5% profit!!” — Barbara N.
“I want to thank you for helping me through this tough time in the market. In just over 24 hours, I was up over 350%.” — Ron M.
“The end of last week, I traded puts on DIA. I made $1,200, which was a 44% return in just 24 hours!!! Love it!!!” — Rocky B.
I also trade with the strategy for charity, using a special account that I fund.
Those profits go to help dogs and cats waiting for permanent homes at Animal Friends Alliance.
On Wednesday, June 10, I’m sharing the full details of my One Trade strategy with anyone — for free.
To learn more, click here.
Michael Carr, CMT, CFTe
Editor, Peak Velocity Trader