Kevin AmolschThis topic has come up twice for me recently in two completely different rooms, and it is one of those debates that never seems to go away. It is also one that people may not fully understand before they dig in:
Should you stay focused on one investment strategy, or should you diversify?
There are strong arguments on both sides, which is why we cannot all agree. The case for focus is simple and compelling. When you stay in your lane, you get better. You build expertise. You understand the risks. You can move faster and make better decisions because you have seen similar situations before.
This is a principle often associated with Warren Buffett. As he has famously said, “Risk comes from not knowing what you are doing.”
The companies that niche down and become very focused tend to perform better. The same is true for real estate investors. The ones who pick a strategy, master it, and stick with it are often the ones who find the most success.
And that works… until it doesn’t.
On the other side, diversification is about protection. The concept is simple: if one investment struggles, others can help carry the load.
Recently, I have spoken with several investors who are heavily concentrated in real estate, are focused on a specific strategy, and are still feeling real pain in today’s market. Some are even losing properties. Deals are slower, margins are tighter, and liquidity is harder to find.
More than once, I have heard the same comment: “I wish I had diversified.”
When you hear that from enough people you look up to, you take it seriously. This is a lesson much better learned through conversations like this than through firsthand experience.
The confusion comes when you understand that focusing on one specific type of real estate deal or strategy is often what it takes to become truly successful, but you also know diversification is what can help protect you during a downturn.
The good news is this is not an either/or decision. I think it is a strategy question and a decision based on your intended results.
My thought on this often-confusing subject is to stay focused inside your business and diversify your investments outside your business.
If your business is real estate investing and that is how you pay your bills, focus on a single strategy (or a very limited number of strategies). Build systems, relationships, and expertise. Then, take a portion of the income created from that focused energy and invest it.
True investing is investing passively for cash flow and/or growth. The key is that it should be passive and should not distract you from the active investing you do in your business to generate income.
Whatever investing you are doing should not take attention away from making money, whether that is through a business you own or a career with another firm.
It is a simple formula:
Earn income and invest it passively.
One example I have seen work really well is a fix-and-flip investor who stays focused on flipping but keeps one or two houses each year for their personal rental portfolio while also investing in stocks or other alternative assets.
The ultimate goal is to build a portfolio that is not dependent on a single strategy, market cycle, or asset class. Diversification gives you multiple streams of income and assets that can provide flexibility or liquidity when needed.
My advice is to take advantage of focus where it matters most — your ability to generate income — while also building protection through a diversified passive portfolio.
Make money with focus. Keep it with diversification.
