After leading the market higher for much of 2020, technology and tech-related stocks have tumbled over the past days. While nobody knows where tech stocks will go from here, the correction underscores how important a diversified investment portfolio is for building long-term wealth. But what does a diversified portfolio really mean? Could you be diversifying your portfolio the wrong way?

Why diversification matters 

Diversification is one of the most effective risk management techniques available to investors. At its core, diversification is simply not putting all your eggs in one basket. If your portfolio contained just a few tech stocks, the recent correction would have dragged down your portfolio value. But if you were invested in multiple asset classes across different sectors and geographies, your portfolio will be less affected. Even if your tech assets underperform, your other investments might still hold steady.

What a diversified asset allocation looks like

Generally, stocks and bonds...