Hi folks,

I hope you’re all stay­ing out of the heat and are safe from the fires. Despite all that and an end­less series of crazy glob­al events, our port­fo­lios con­tin­ue to crush it. Let’s see where we are at this week!

All the Best,
Cam

QAV MYTH KILLERS

Why We Don’t Believe in “Diversification for Safety”

The Myth

Every finan­cial advi­sor, super­an­nu­a­tion fund man­ag­er, and invest­ment guru will tell you the same thing: spread your mon­ey across 20, 30, even 50 stocks to “reduce risk.” Diver­si­fy across sec­tors, asset class­es, geo­gra­phies. Nev­er put too many eggs in one bas­ket. It’s the gospel of mod­ern port­fo­lio the­o­ry, and it’s sold as the safest way to invest.

It’s also a con­fes­sion of incom­pe­tence.

Why People Believe It

Look, the fear is real. Peo­ple have lost every­thing bet­ting on sin­gle stocks or sec­tors. The dot-com crash, the GFC, count­less indi­vid­ual com­pa­ny col­laps­es — the wreck­age is every­where. So when some­one in a suit tells you that own­ing 40 stocks will “smooth out the volatil­i­ty” and pro­tect you from dis­as­ter, it sounds sen­si­ble. Respon­si­ble, even.

And for most peo­ple — peo­ple who have no sys­tem, no analy­sis, no edge — it prob­a­bly is the least-bad option. Bet­ter to own the mar­ket than to gam­ble on tips from your mate’s cousin.

The Trap Behind the Logic

But here’s what they don’t tell you: diver­si­fi­ca­tion for safe­ty only makes sense if you’re invest­ing blind.

If you have no idea which com­pa­nies are gen­uine­ly under­val­ued, which have strong fun­da­men­tals, which are actu­al­ly worth own­ing — then yes, buy every­thing and hope the win­ners can­cel out the losers. That’s not invest­ing. That’s sta­tis­ti­cal hedg­ing against your own igno­rance.

The dirty secret of “safe diver­si­fi­ca­tion” is that it guar­an­tees medi­oc­rity. When you own 40 stocks, you’re not reduc­ing risk — you’re dilut­ing con­vic­tion. You’re buy­ing your 34th favourite com­pa­ny because some the­o­ry tells you to, not because it’s actu­al­ly a good invest­ment. You’re own­ing busi­ness­es you don’t under­stand, in sec­tors you haven’t ana­lyzed, at prices you haven’t val­i­dat­ed, all in the name of “bal­ance.”

War­ren Buf­fett called it exact­ly right: “Diver­si­fi­ca­tion is pro­tec­tion against igno­rance.” If you know what you’re doing, spread­ing cap­i­tal across dozens of posi­tions isn’t safe­ty — it’s sab­o­tage.

The Hidden Cost

The real dam­age isn’t just the under­per­for­mance, though that’s painful enough. It’s what hap­pens over 10, 20, 30 years.

Over-diver­si­fi­ca­tion trains you to be pas­sive. You stop ana­lyz­ing. You stop think­ing crit­i­cal­ly about what you own. You become a col­lec­tor of tick­er sym­bols, not an investor in busi­ness­es. You check your port­fo­lio bal­ance but could­n’t explain what half your hold­ings actu­al­ly do or why you own them.

Worse, it makes you feel safe while deliv­er­ing mar­ket-aver­age returns — which, after fees and infla­tion, often means you’re bare­ly keep­ing up. You’re work­ing hard­er, sav­ing more, tak­ing “safe” advice, and end­ing up in the same place you would have by just buy­ing an index fund and ignor­ing the noise.

The fund man­agers love it, though. More hold­ings mean more trades, more fees, more jus­ti­fi­ca­tion for their exis­tence. Your safe­ty is their rev­enue stream.

The Principle (Not the Recipe)

There’s anoth­er way. Instead of own­ing every­thing because you under­stand noth­ing, you could own few­er posi­tions because you under­stand them bet­ter. You could have a sys­tem — a repeat­able, evi­dence-based process—that iden­ti­fies qual­i­ty com­pa­nies at gen­uine val­ue. You could invest with con­vic­tion in busi­ness­es you’ve actu­al­ly ana­lyzed, rather than sta­tis­ti­cal safe­ty nets.

This isn’t about con­cen­tra­tion for the sake of it. It’s about let­ting gen­uine oppor­tu­ni­ty dri­ve your port­fo­lio, not arbi­trary rules about sec­tor bal­ance or posi­tion lim­its. Some peri­ods, qual­i­ty and val­ue show up in gold min­ers. Oth­er times, it’s finan­cials or indus­tri­als or some­thing else entire­ly. The mar­ket does­n’t care about your diver­si­fi­ca­tion spread­sheet.

We don’t diver­si­fy for safe­ty. We invest with rules. There’s a dif­fer­ence.

What Now?

If this res­onates — if you’re tired of mediocre returns wrapped in the lan­guage of pru­dence — maybe it’s time to see what invest­ing with an actu­al sys­tem looks like.

Not tips. Not pre­dic­tions. Not guru non­sense.

Rules.

STOCK ANALYSIS OF THE WEEK

For edi­tion 205 of my week­ly Aus­tralian Light mem­ber email this Mon­day, I did an analy­sis of Aure­lia Met­als Lim­it­ed (AMI). Aus­tralian Light and Club mem­bers can read it here.

For edi­tion 4 of the U.S. Light mem­ber email, I did an analy­sis of Con­tro­lado­ra Vuela Com­pa­nia de Avia­cion SAB de CV (VLRS). U.S. Light and Club mem­bers can read it here. We’re also talk­ing about it in more detail on the U.S. episode this week.

On the full Aus­tralian pod­cast this week, Tony did a deep dive on KME (Kip McGrath Edu­ca­tion Cen­tres). See the pod­cast link down below if you want to lis­ten to his analy­sis.

BUY LIST

Each week, we pro­duce a buy list based on our val­ue invest­ing sys­tem that we share with our QAV Club mem­bers. The intend­ed pri­ma­ry pur­pose of this buy list is for club mem­bers to use as a ref­er­ence for com­par­ing their own buy list. In the­o­ry, all of our buy lists should look pret­ty sim­i­lar each week.

Below is a link to the AU list for this week:

QAV Aus­tralian Val­ue Invest­ing Buy Lists 2026-01-11

Below is a link to the US list for this week:

QAV Amer­i­can Val­ue Invest­ing Buy List 2026-01-10

PORTFOLIOS

We com­pare our per­for­mance to what we think is the most rel­e­vant bench­mark (SPDR 200 in Aus­tralia, S&P500 in the USA), but if you’re new to invest­ing, these com­par­isons might not mean much. Instead, you can com­pare our per­for­mance to the top-per­form­ing Super Funds in Aus­tralia.

AUSTRALIAN

QAV DUMMY

Five Year Report: Over the last five years, our port­fo­lio is +17% p.a. vs the bench­mark +10% p.a.

Month­ly Report: The AU Dum­my Port­fo­lio was +2% p.a. for the last 30 days vs the bench­mark +3.5% p.a. The bench­mark real­ly shot up this week.

No trad­ing in that port­fo­lio this week.

For the 2025 FY, our port­fo­lio is +22% vs +6% for the index — near­ly QUADRUPLE MARKET.

QAV LIGHT

In the last 30 days, the Light port­fo­lio was +3% vs the index which was ‑0.6%.

Our most impres­sive return for the last 30 days is min­ing ser­vices com­pa­ny MAH which is +27% over the last 30 days and +50% since we added it on 3/11/2025.

For the last 12 months, the Light port­fo­lio is +40% vs the index +8%. In oth­er words — QUINTUPLE MARKET. Insane. It won’t last, of course, But it should give us a nice buffer for when things bal­ance out. I’ve learned that over the years. We have peri­ods of ter­rif­ic out-per­for­mance, and that’s bal­anced by peri­ods of under-per­for­mance and aver­age per­for­mance. Over the long term, we aim for an aver­age of dou­ble mar­ket.

Since incep­tion (Feb 2022), the Light port­fo­lio is +21% vs the index +10%.

Become a QAV Light Member today and start your investing on the right track

If you want to find out what we’re trad­ing in QAV Light each week, sign up to become a mem­ber. You’ll get an email from me every Mon­day let­ting you know what we’re buy­ing and sell­ing in that port­fo­lio. You can choose to copy our trades or not. It’s the eas­i­est way to start your rules-based invest­ing career… and you don’t even need to know the rules. I’ll fol­low the rules for you. It’s a good first step to even­tu­al­ly becom­ing a QAV Club mem­ber and learn­ing how to run the sys­tem by your­self.

AMERICAN

QAV DUMMY

Since incep­tion (Sep 2023), our port­fo­lio is +82% vs the S&P 500 +56%.

Our U.S. port­fo­lio for the last 30 days was +11.5% vs +1% for the S&P 500.

No trades this week.

QAV LIGHT

I’ve recent­ly start­ed our U.S. Light port­fo­lio, too, but it’s too ear­ly to both­er report­ing.

THIS WEEK’S EPISODES

QAV AU 902 — Quin­tu­ple

Pick­ing Through the Wreck­age of XPLR Infra­struc­ture (XIFR) – QAV AMERICA 34

STOCK NEWS AND UPDATES

• Super Retail dropped 5.3 per cent as its first-half earn­ings guid­ance fell short of expec­ta­tions
• US fed­er­al pros­e­cu­tors open crim­i­nal inquiry into US Fed­er­al Reserve chair

COMMODITIES

This week we report­ed that Gold (AUD), Coal (ther­mal), Mag­ne­sium and Wheat had all become a BUY. LNG became a SELL.

DISCLOSURE

Please review our trad­ing and dis­clo­sure pol­i­cy.

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That’s it for the week!

QAV A GOOD SHAREMARKET!

Got a ques­tion? [email protected]