Here is a short video where I explain diversification as it relates to a portfolio.
Diversification is a fundamental investing principle, but it is often misunderstood.
Many investors tend to view individual investments in isolation (is it good or bad?).
In a properly designed portfolio, investments are not good or bad - each part of a diversified portfolio serves a specific purpose.
Diversification’s primary benefit is that it helps us reduce avoidable risks. This picture helps explain how that works.