Barbara Corcoran’s Shocking Advice: Ditch Diversification and Savings for Wealth

Controversial Investment Advice from Shark Tank Investor Barbara Corcoran

Barbara Corcoran, a renowned investor and businesswoman, has shared her unconventional views on investing in a recent interview. Unlike most financial experts, Corcoran argues that diversification is not the best path to building wealth, and she’s also against saving money in the traditional sense. While some may find these ideas shocking, Corcoran believes they are essential for achieving outsized returns.

What Does Corcoran Say About Diversification?

Diversification is a fundamental concept in investing that involves spreading your investments across various asset classes to minimize risk. The idea is that by combining non-correlated assets, you can reduce the volatility in your overall portfolio and avoid putting all your eggs in one basket. However, Corcoran takes a contrarian view on this topic. As she explained to CNBC Make It in 2023, "One piece of advice people hear all the time, and I just don’t believe it, is: ‘Diversify, don’t put all your eggs in one basket.’ I put all my money in the real estate basket, my brokerage firm and everything in there went to buying properties."

Corcoran’s statement may seem surprising, but she’s not alone in her thinking. Billionaires Warren Buffett and Charlie Munger, who were co-chairs of Berkshire Hathaway until Munger’s passing in 2023, famously referred to diversification as "diworsification" and "protection against ignorance." Like Corcoran, they believed that if you know what you’re doing, putting most or even all of your money into a single idea is the way to achieve outsized returns.

Why Is She Against Saving?

Corcoran’s "anti-saving" stance may be confusing at first, but it’s essential to understand her perspective. Unlike saving and investing in traditional assets like stocks or bonds, Corcoran prefers to reinvest her income into her growing business. As she told CNBC Make It, "I’m just not a believer in saving money." She spent every dollar she made and threw it back into the business, which is a common practice among successful entrepreneurs.

Corcoran’s approach towards "saving" is not an admonition against saving and investing your own way, especially if you don’t have your own business. The point Corcoran makes is that people should use their money to build and grow something rather than just let it sit idly. This mindset has allowed her to achieve significant success in the real estate space and become a world-renowned expert.

What Are the Risks With Corcoran’s Approach?

The main risk with Corcoran’s approach is that you might swing and miss, perhaps in terrible fashion. If you put all your eggs into one basket and don’t fully understand what you’re doing, you might easily lose everything you have. That’s not investing; it’s speculating. While some speculations can work out, you’re just as likely to go bust as you are to get lucky and punch a winning ticket.

Corcoran herself even admits that she almost went bankrupt "for the fifth time" during the 1990-91 recession, so it’s clear that even with an expert’s touch, non-diversification can be an aggressive strategy. Taking Corcoran’s "non-saving" advice too literally could also cause problems if you think of it as a suggestion to simply blow all your money on shopping sprees.

While Corcoran fully endorses enjoying life and buying the things you want with money you have, she earned that privilege by first reinvesting every dime she had into her growing business. Her process for growing wealth is not to save by being frugal but to invest so you can earn the money to have anything you want.

Could Her Strategy Work for You?

An important thing to note is that Corcoran believes in her anti-diversification, anti-saving stance because it ended up working out for her in spectacular fashion. She sold her real estate business for $66 million in 2001 and is now a world-renowned expert in the real estate space and a star investor on "Shark Tank." However, this doesn’t necessarily mean her strategy would work for everyone.

For example, if you run a solid business, know what you are doing, and funnel all your time, energy, and money into it, you certainly could succeed in the same way. But if you have poor business sense — or if your idea of not diversifying is putting all your money into an obscure cryptocurrency — you could just as likely go bust.

The key is to understand exactly what you’re doing, as Corcoran clearly does. If you have her level of expertise, dedication, and business know-how, then focusing on one solid investment — like yourself — could indeed be the right path to building wealth.

Conclusion

Barbara Corcoran’s unconventional views on investing may seem shocking at first, but they’re rooted in her own experiences and successes. While diversification is a fundamental concept in investing, Corcoran believes that putting all your eggs into one basket can lead to outsized returns if you know what you’re doing. Her approach towards "saving" is not an admonition against saving and investing your own way but rather an encouragement to reinvest your income into your growing business.

While there are risks associated with Corcoran’s approach, it’s essential to understand that she’s not advocating for speculation or reckless behavior. Instead, she’s encouraging entrepreneurs and investors to take calculated risks and focus on building their businesses. If you have the expertise, dedication, and business know-how, then her strategy could indeed be the right path to building wealth.

However, if you’re just starting out or don’t have a solid understanding of your investments, it’s crucial to remember that Corcoran’s approach is not for everyone. Diversification and saving are essential components of any investment strategy, and ignoring these principles can lead to significant losses.

Ultimately, investing is about taking calculated risks and making informed decisions based on your knowledge and experience. While Corcoran’s views may be unconventional, they’re a reminder that there’s no one-size-fits-all approach to building wealth.