Be it a financial advisor, a fund manager, or my finance professor, they often lecture and uphold the holy grail of investing: diversification, in the name of minimizing unsystematic risk. 

Broad diversification is a method to ensure one result: that being wrong about any one stock isn't fatal to your financial future. If you hold 20 stocks and one collapses, that's a much smaller hit to your portfolio. How well could one stand having nearly 1/5 of his portfolio evaporate in a single week? For most people, not very well. Financial behaviorists have found that the vast majority of people feel double the pain of a loss as they do joy from a gain of equal size.

But if you hold one stock and it goes up substantially, you're going to become quite wealthy. What's not to like about that? It's less work following a single company than a bunch of them, right?

People like Warren Buffet, George Soros, and Charlie Munger savage diversification as the refuge of the ignorant. The logic here is simple: Great ideas come by only once in a while, and when you get them, you pounce with as much money as you can muster. For these people, wide diversification would be a ridiculous notion. That's what made them who they are. And as they accumulate wealth, they acquire assets that further improve their judgement and timing, and things take off from there. The wealthy become ever wealthier.

But there's one catch. The only reason that one should consider really concentrating his portfolio is if one commits to knowing a ton about these businesses and has the utmost confidence in the earnings estimates he builds for them. Oh, and by the way -- being confident might not be enough. He also has to be rational in that confidence. After all, drunks messing with firearms might be pretty darn confident too. That doesn't mean they aren't causing an awfully dangerous situation.

That's what makes investing so fun -- mastering the art of capturing great opportunities, and striking them with everything you have. It's definitely not easy. Afterall, there is only one Warren Buffet.