Diversification or Focus portfolio?

Recently I read a book that I bought for more than 10 years ago which I have read only once then. The title of the book is " The Winning Investment Habits of Warren Buffett & George Soros".

I must say I have missed out these 2 points highlighted by the author ( of course whether he is right or not, I am not too sure) which I find interesting.


1. Attitude towards Risk
On top of the winning investment habits list of these 2 successful investors - they always think of capital protection. We all knew Warren Buffett's famous maxims - Rule No 1: Never lose money, Rule No 2 : Never forget Rule No 1.
To my surprise, according to the author, George Soros is also risk-averse and his decision making process is always to consider the downside first. 
I supposed one of the ways to strengthen this habit is only invest within our circle of competence. Do not invest in something that we are not familiar with!!


2. Diversification
Warren Buffett once said "Diversification is protection against ignorance, it makes little sense for those who know what they’re doing.” He seems not in favour of diversification as an investment strategy to minimise risks as opposed to view expressed by many other great investors, especially Benjamin Graham.
Then I read from different sources and realised that he said that with reference to professional investors as professional investors have better resources, hence better chance to know which investment can give them better return. For non-professional investors, he still think diversification is a better investment strategy.
My personal take is that it has to do with circle of competence as well as investment time horizon (fund size could be a factor but I am not there yet). If we know the company/industry well, we have better chance to earn a higher return as we know when a company is undervalue or expected to report strong growth. Similarly, if we have longer time horizon (of course Warren Buffett's famous saying is to hold forever), our chance of winning is also higher as we can wait till the market uncover companies that are undervalued or with growth potential. Remember the popular saying " Time is the best friend of good companies and enemy for bad companies". 

I must say diversification has been my biggest dilemma lately, my personal experience is that I have achieved much better return when I focused on only a few stocks. When I attempted a more diversified portfolio, I realised the return is not as high though this is not conclusive as we have not really seen a major correction in the last few years.  

Stock investment is so exciting and one can continue to learn endlessly. Is diversification only better than focus strategy in a down market? Is diversification an effective risk minimisation strategy while focus is profit maximisation strategy? My learning journey continues...