The Role of Diversification in an Individual Stock Portfolio

by Vitaliy N. Katsenelson

It is frequently said that diversification is the only free lunch an investor will ever get, as this risk-reduction strategy doesn’t need to lead to subsequent reduction in return.

Or does it?

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Warren Buffett disagrees: "Diversification is a protection against ignorance. It makes little sense for those who know what they are doing."

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