A few days ago, I was having lunch with an acquaintance when he made a remark that went something like this: when the markets were experiencing a sell-off in the weeks before, I saw that almost everything went down: shares, bonds, REITs, gold, etc. I thought diversification is supposed to protect us in all market conditions but somehow this is not true. Is diversification dead? 

This is a very good question, and I believe most of you would ask the same thing during that moment. As a proponent of diversification, it is in my interest (and all of ours) to address it.

There are two explanations: for the first one, I shall use a paper which one of the authors is the father of modern portfolio theory (MPT), Harry Markowitz. The second one is based on my observations and hypothesis with regards to the market.

#1: Does Portfolio