Are There Any Reasons to Diversify?

Many financial gurus often advises that diversification is used by people to protect themselves against their own ignorance. They noted that if you know what you are doing, you should concentrate your portfolio into equities as they achieve the highest return. And you can achieve low risk not by simply spreading your money around, but by your competence of knowing which funds and stocks to pick. In fact, if you have read the latest chapter of Conspiracy of the Rich by Robert Kiyosaki, there was a paragraph that goes:

‘If you listen to most financial pundits, they will always say that smart investors diversify. Yet, to quote Warren Buffett in The Tao of Warren Buffett, “Diversification is a protection against ignorance. It makes very little sense for those who know what they are doing.”‘

If this investment concept was preached years ago, well, probably the financial gurus are right!

Let’s look at the unimaginable market of today!