Diversification: Don't LOSE IT ALL!

The most argued principle in my original post: Top 10 Investment Principles is Diversification. Considered by many, a wise advice when investing, diversification means holding many assets rather than one in particular. However, some investors claim it to be a lack of focus. This begs the question: “Is diversification important or mere herd mentality taught in investment courses?” How is diversification important? If one particular asset has a poor performance, it can do terrible damage to your portfolio.Through diversification, you spread your money across a variety of assets. Thus, it limits the fluctuations of your returns. Last year’s winners are often next year’s losers. Therefore, it’s wise to not chase returns exclusively. No one can predict, for sure, which asset will be the best or the worst performing in a certain year. Diversification can help you withstand poor performances and avoid you to leave a certain asset on its low point. Thus, you are unlikely to be forced to accept major losses. “Don’t put all your eggs in one basket.” diversification Miguel Cervantes, 1605 Author of Don Quixote "Put All Your Eggs in One Basket, and Then Watch That Basket" Andrew Carnegie, 1885 Entrepreneur The debate Diversification helps offset poorly performing assets. However, it does not ensure a profit or guarantee against a loss. And, if you diversify too much, you may lose focus and miss returns.