Everyone claims that its very important to diversify your portfolio to reduce risks and increase the possibility of long time profits.
There are basically 3 industry sectors that I know rather well and love. If I look at all my stocks there are about 11 different sectors.
Now my 3 beloved sectors give me an average profit of 30% each year - while all remaining sectors give me an average loss of 20%.
Since my portfolio builds more on my 3 known sectors I'm still able to be profitable.
The problem: When I pick new stocks I tend to select from my preferred industries. Because I know them and they seem to turn out to be better investments for me. On the other hand with each stock from there the concentration risk increases.
Should I value diversification over profits?