: Billionaires typically own concentrated stock positions this investor posted a 30-fold gain over 10 years on one...

True or false: To build big wealth in the stock market, it pays to be widely diversified.

If you guessed true, you might want to reconsider.

Successful investors from Warren Buffett to Ron Baron teach us time and again that taking concentrated positions can really pay off.

Of course, this isnt for everyone. For it to work, you have to have the time and skills to figure out what stocks to concentrate in. Otherwise, you might choose badly and lose a lot of money. There is a high risk of this happening. If you dont have the time, just get broad market exposure for the long term.

But if you want to tiptoe into taking larger positions, one workaround is coat tailing. Find an investor with a good long term track record. Then buy a larger-than-normal position in what they own a lot of, after you have studied the company enough to understand it.

With that in mind, I recently checked in with James Davolos of the Kinetics Market Opportunities KMKNX, -3.22% and Kinetics Paradigm WWNPX, -3.79% funds. Those mutual funds are a good study in concentrated position investing. They have enviable records, and a whopper of a concentrated position more on that later.

The funds beat their Mid-Cap Growthcategory and Morningstar U.S. Midcap Broad Growth Index by an annualized five to 10 percentage points over the past three to five years, according to Morningstar Direct.

Having a concentrated position comes naturally to Davolos, who helps manage the two funds.

Look at the holdings of almost every billionaire on earth, he says, and youll see their wealth is wildly concentrated, whether it is in a public stock or private business. In the early days, the insurance company Geico produced the big gains for Berkshire Hathaway BRK.B, +0.10%, he notes.