Saut quotes the late investor and philanthropist John Templeton, "The only investors who shouldn't diversify are those who are right 100 percent of the time."
Saut says a lot of these people think they work for a good company. "So not only do they have their livelihood, their income, hooked to this company," he says, "but they have all of their investment dollars, outside of their real estate, tied to this same single company. So if this company falls on hard times, for whatever reason, not only do they lose their income, they lose their investment capital."
Ideas on investing
Saut says it is always a good idea to find a good financial adviser — someone who understands managing risk.
He also gives other ideas on investing.
For example, how to evaluate a company.
"The three most important things when evaluating a company are management, management, management," he says. "Good managers can take lousy assets and do wonderful things with it. And bad managers can take wonderful assets and do really bad things with them."
He says another good idea is to narrow the universe of stocks to choose from by whether they have consistently increased dividends every year.
Another trick would be to follow what really good investors, such as Warren Buffett, invest in.
"Another thing you can look at is what I would term owner-operators," he says. "If you look at companies over time, where the people that own the majority of the stock or a large portion of the stock and run the company, those companies tend to do better than management teams that own very little stock."
To look at company fundamentals, he says Yahoo Finance does a pretty good job for free.
Even though he is fond of examples that have $100,000 in them, Saut says people can start small. "You can buy one share of stock and put it into a dividend reinvestment program," he says. "You can buy certain mutual funds in an IRA for as little as $100 — most are $500 or $1,000, but you don't need a lot of money to start. The key is to start."
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