Hi Vishal,
There are plenty of examples from real life but what comes to my mind immediately is from the game of cricket. To illustrate this let us understand two great batsman Dravid and Sehwag. Whom will you prefer first always? To me Dravid is the first choice always because of his consistency across the game format. Sehwag strike rate is brilliant but lacks consistency. He will make anything from 0 to 300 in any match but Dravid can be relied upon to score at least between 30-50 runs in a match. Players like Dravid build the team foundation for long run but then for match winning, pitch hitting performances we need players like Sehwag also. So right mix and appropriate proportion of such players are always preferred in a team. Therefore according to me while constructing the Portfolio of Stocks we should have large percentage of consistent compounding companies and smaller proportion of small, mid, micro cap companies.
Although there are exceptions but statistically if the price/return distribution of stocks is right skewed then most right-skewed distributions have the mean to the right of the median. A right-skewed distribution has a long right tail. And this is what we want and need such stocks in portfolio. Stocks with large variation (e.g. Cyclical stocks) in both sides of its mean values are less reliable and does not give consistent return.
Hope it helps.
VK
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