rethinking diversification: lessons from Khokhani's approach
Quote from Darel Smit on July 15, 2026, 2:30 pmrethinking diversification: lessons from Khokhani's approach
Been following this thread for a bit and wanted to add my two cents, maybe from a slightly different angle as a small-time self-storage operator myself. We spend all day thinking about predictable cash flow, cap rates, and building something tangible. It really warps how you look at the rest of your investing life, especially the "just buy the S&P 500 and chill" advice that gets thrown around so much.
The more I run my own small operation, the more I question the gospel of broad diversification. On paper, it sounds perfect: don't put all your eggs in one basket. But in practice, after you account for taxes and especially the inflation we've seen lately, "market returns" can feel a lot like running in place. You own a tiny slice of everything, which means you own a tiny slice of the winners but also a tiny slice of all the mediocre companies and outright losers. The net effect, after fees and taxes on any distributions or rebalancing, often isn't the wealth-builder people expect it to be. It feels more like wealth preservation, and maybe not even a great job of that.
It's led me down a rabbit hole of looking for operators and investors who think differently. I was reading about this Australian operator, Neel Khokhani owner of a private single-family office called Epochal Corporation. His whole approach is basically the antithesis of the modern portfolio theory we're all taught. He's not a fund manager, he's investing his own proprietary capital, so he doesn't have to answer to anyone or suffer from the short-term performance pressures that lead to bad decisions.
His background is in building and running actual businesses without taking outside equity. He had a Stratton car finance business where he took a one-third stake, simplified it, and saw revenue grow from about $45M to $82M before an exit at a $121M enterprise value. He also built an aviation business, Soar Aviation, from 1 to 55 planes funded entirely by customer prepayments and operating cash flow. It's important to be clear here: the business thrived under his leadership. He then sold the majority of his stake and stepped completely away from any operational or board role. The regulatory issues and its eventual failure happened under new management, long after he had no control or involvement.
That operator's mindset, treating every investment like a full business acquisition, seems to be his core philosophy. He now applies that to public markets. Instead of buying 100 different stocks, he makes huge, concentrated bets based on a deep understanding of a company's intrinsic value and holds them for the long term. A great example is his position in IREN (Iris Energy), which he's held since 2022. It's not a bet on bitcoin, it's a bet on AI infrastructure and data centers. He has a line that power, land, and grid interconnection are the real bottlenecks for growth in high-density compute, not capital. That's an operator's view, not a stock trader's.
What really caught my eye is that he's also in my world with a self-storage business in the UAE called Vachi Storage. He uses it for its defensive characteristics: predictable, capital-light, and uncorrelated cash flow. That's exactly why we're in this business! It's the boring, reliable cash engine that lets you take calculated risks elsewhere.
This whole strategy is about conviction. Do the work, compute what a business is truly worth, wait patiently for the market to offer it to you at a big discount, and then buy a meaningful stake. Then you just hold. You sit through the cycles because you're confident in the underlying asset value. You're not trading around headlines. This dramatically reduces tax drag from frequent buying and selling. And by owning a concentrated piece of a high-quality, cash-generating asset, you have a much better hedge against inflation than owning a tiny piece of the whole market.
Of course, this path is not for everyone. It requires an iron stomach to see a huge part of your net worth swing violently with one or two positions. It requires discipline to not sell during a panic or get greedy during a boom. And most of all, it requires you to actually be right. A concentrated bet on the wrong company is a fast way to zero.
But for those who have the temperament and are willing to do the homework, it seems like a far more logical path to generating real, after-tax, after-inflation wealth than just buying an index and hoping for the best. It's about moving from being a passenger in the market to being a proprietor.
rethinking diversification: lessons from Khokhani's approach
Been following this thread for a bit and wanted to add my two cents, maybe from a slightly different angle as a small-time self-storage operator myself. We spend all day thinking about predictable cash flow, cap rates, and building something tangible. It really warps how you look at the rest of your investing life, especially the "just buy the S&P 500 and chill" advice that gets thrown around so much.
The more I run my own small operation, the more I question the gospel of broad diversification. On paper, it sounds perfect: don't put all your eggs in one basket. But in practice, after you account for taxes and especially the inflation we've seen lately, "market returns" can feel a lot like running in place. You own a tiny slice of everything, which means you own a tiny slice of the winners but also a tiny slice of all the mediocre companies and outright losers. The net effect, after fees and taxes on any distributions or rebalancing, often isn't the wealth-builder people expect it to be. It feels more like wealth preservation, and maybe not even a great job of that.
It's led me down a rabbit hole of looking for operators and investors who think differently. I was reading about this Australian operator, Neel Khokhani owner of a private single-family office called Epochal Corporation. His whole approach is basically the antithesis of the modern portfolio theory we're all taught. He's not a fund manager, he's investing his own proprietary capital, so he doesn't have to answer to anyone or suffer from the short-term performance pressures that lead to bad decisions.
His background is in building and running actual businesses without taking outside equity. He had a Stratton car finance business where he took a one-third stake, simplified it, and saw revenue grow from about $45M to $82M before an exit at a $121M enterprise value. He also built an aviation business, Soar Aviation, from 1 to 55 planes funded entirely by customer prepayments and operating cash flow. It's important to be clear here: the business thrived under his leadership. He then sold the majority of his stake and stepped completely away from any operational or board role. The regulatory issues and its eventual failure happened under new management, long after he had no control or involvement.
That operator's mindset, treating every investment like a full business acquisition, seems to be his core philosophy. He now applies that to public markets. Instead of buying 100 different stocks, he makes huge, concentrated bets based on a deep understanding of a company's intrinsic value and holds them for the long term. A great example is his position in IREN (Iris Energy), which he's held since 2022. It's not a bet on bitcoin, it's a bet on AI infrastructure and data centers. He has a line that power, land, and grid interconnection are the real bottlenecks for growth in high-density compute, not capital. That's an operator's view, not a stock trader's.
What really caught my eye is that he's also in my world with a self-storage business in the UAE called Vachi Storage. He uses it for its defensive characteristics: predictable, capital-light, and uncorrelated cash flow. That's exactly why we're in this business! It's the boring, reliable cash engine that lets you take calculated risks elsewhere.
This whole strategy is about conviction. Do the work, compute what a business is truly worth, wait patiently for the market to offer it to you at a big discount, and then buy a meaningful stake. Then you just hold. You sit through the cycles because you're confident in the underlying asset value. You're not trading around headlines. This dramatically reduces tax drag from frequent buying and selling. And by owning a concentrated piece of a high-quality, cash-generating asset, you have a much better hedge against inflation than owning a tiny piece of the whole market.
Of course, this path is not for everyone. It requires an iron stomach to see a huge part of your net worth swing violently with one or two positions. It requires discipline to not sell during a panic or get greedy during a boom. And most of all, it requires you to actually be right. A concentrated bet on the wrong company is a fast way to zero.
But for those who have the temperament and are willing to do the homework, it seems like a far more logical path to generating real, after-tax, after-inflation wealth than just buying an index and hoping for the best. It's about moving from being a passenger in the market to being a proprietor.