Hi Craig,
In my opinion, diversification is for the middleclass and up to hold onto the money they have already made. If you are poor, the little amounts you have will never grow into anything if you diversify. If you are poor and more scared of losing the little you have, then by all means diversify, just do not expect a large retirement fund, even decades later (takes money to make money). You are just going to have to take some risks if you ever want a chance to join a higher social class. I believe poorer people who might only have $500-$1000 per year to invest should dabble in penny stocks, a different one each year (there is your diversification). I spent almost $1000 on my first one in 1996 when I was making 7 dollars an hour, and kept adding to it for 12-13 years as other “bets” paid off, dropping around $1000 on a different one every 1-3 years as I saved up that amount. Sold it 17 years later for about 9x. Merrill Lynch kept telling me I have too much in that penny stock (I had as much of 70% of my portfolio at one point), I kept ignoring them and I was glad I did. I later went to TD Ameritrade, maybe around 2007. I had brought my first 401k to Merrill Lynch in 1994 that had grown to $35000 over the previous 9 years (worked 10, but you could only sign up for the 401k in November, and I started late October. I was still on probation during November. Did 10% of my wages before tax when I became eligible). I made $3.50 an hour when I started and $14.99 my last (and best) year there. My wages there were up to 4 something per hour 3 years after starting (stockboy), when I moved to a commission sales position and my wages grew faster every year, Like to $6, $8, $10, etc. I estimated I put about $8000 total into my 401k over that time. $300-$400 each year for the first 3 I was eligible, and only around $1500 my last year. They offered multiple mutual funds (8-10, cannot remember exactly anymore it was so long ago) to invest in, I put all of mine into one of them. It was the third best performer over my whole time there. Everyone who “diversified” underperformed me by a wide margin. I think finding a successful penny stock is easier than winning the lottery at least, and look how many people only have that as their strategy. I only have penny stocks today, and I am down a lot right now, but that is only because I am actually living off my IRA entirely (for 10 years now. I would have hundreds of thousands dollars more if I was not. I have never made more than $35000 in a year working-with overtime). My quickest $100000+ cash gain on my penny stocks so far was a $140000 gain in 2020 on closing a $100000 investment from 2013. Invested half again, some new, some added to previous holdings. Saved the rest as a small income I took out each year. I do not recommend my path (I did not want to do this, but could not find anything but a crap job after I turned 50. I like MJ. Seems to be a disqualifying factor today in my state. My long hair used to be the only issue, but at least I could get into the door, even if I had to start at the bottom), but I strongly believe everyone who is not wealthy should dabble in penny stocks. Just do not be forgiving of any red flags they show you. And sell 1/2 to 1/4 when they increase 2x to 4x respectively, to get your original investment back, depending on how risk averse you are. I honestly recommend watching one for a minimum of 3 months before you jump in and I think you should actually watch one for 1-3 years before jumping in. There can be huge returns in a short period of time. I had one I bought into from 2010-2012 that shot up 5000% in a few month period. I was just starting to dive deep into all things penny stocks then, so I did not sell any until 6 months after it peaked (2013. $2000 investment turned into $3600 total). I left a lot of money on that table. Lesson leaned. The non-penny stocks of today that achieve those 1000%+ returns usually take a decade or decades to grow like that. The losses are the same for both types. You can only lose 100% either way, and both classes have examples of that. I have had 6 penny stock failures so far, around 50 grand total. I have 6 in my portfolio currently, only 2 look promising right now. That is actually good. I would guess 1/3 to 1/5 successes versus failures means you are doing great. The big returns on the successes more than cancels out the $2000-$4000 (at $1000 a pop) in losses from the others. The wealthy need to minimize risks to keep their money, the poor need to take risks to make some. A guy I once worked with told me his father told him “if you avoid all risks, you will never get anywhere in life”. Just my personal experience. I took a long time to just say that while your advice is good for most, it is not for everyone (no more than mine is), but I felt I should explain to you why I feel this way. I admit I am now curious as to how much you have been able to invest and for how long, but I do not expect you to share that here since we have different ideas about financial transparency. I don’t mind though. I had probably put about $40000 of my own money into my two 401k’s over a period of nearly 19 years. I have never added a cent to my IRA outside of those. I would have gone all in to penny stocks much earlier than I did (sold my very last blue chip stock holdout in 2017) but all the “experts” kept telling me not to and it was tough for me to completely ignore the “experts”. If I could do it all over, I would have saved 15% of my pay for my 401k’s and went all in on penny stocks as soon as I got my IRA.

If you’re a neophyte to managing money, remember this…Diversity is the key to success. Never have more than 5% of your money in any investment. If you’re diligent and take time to research your investments continually, that $50K will seem like chicken feed with time. I’m currently taking advantage of high yield savings vehicles and 6 month treasuries that pay 5% with my excess funds. Diversity!