This is a sequel to my previous post on diversification and is intended to cover (on the contrary) why we shouldn’t diversify too much as well.

Diworsification refers to spreading your capital over many investments that are quite closely related or funds with the same investment strategy, which results in worse off returns and risk. So, we have to balance the number of investments in our portfolio in order to maximize returns and reduce risk, especially given our limited amount of time for those who have a full-time job.

Having a portfolio with 100 different assets may sound like a well diversified portfolio, but as mentioned in the previous post, if all of the assets are not well spread out across the different sectors of the economy, different instruments, etc., the portfolio may still face significant risk due to a downturn in that particular industry or investment type.

So, …