The Role of Diversification in an Individual Stock Portfolio
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?
Warren Buffett disagrees: "Diversification is a protection against ignorance. It makes little sense for those who know what they are doing."
For individual investors managing their own portfolio of individual stocks, both statements are correct.
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