Investment Decisions

Explaining Diversification and Why We Do It

Diversification is hailed as “the only free lunch on Wall Street”, based on the famous quote by Harry Markowitz. Some of us accept this as a fact and take a diversified approach to our portfolios.

Then, a stock our buddy picked quadruples its value or the S&P 500 outperforms other asset classes over a multi-year period (as we’ve seen in the last few years). In times like these, it is easy to lose sight of why diversification is so important.