The original version of this article first appeared in The Business Times.  When a single stock like Nvidia stands out as such a stellar performer, and the Magnificent Seven are driving much of the US and global equity market returns, you may wonder whether diversification is dead, and whether we ever needed it. “Diversification is the only free lunch in finance.” This statement was made famous by Harry Markowitz, the Nobel Laureate recognised for his work on portfolio theory and the benefits of diversification. Simply put, a good diversification strategy will enable you to achieve the same returns with less risk, or to generate better returns with the same amount of risk. We know that risk and return are correlated; they move together. There is no way to improve returns without taking more risk and vice versa. Through diversification, we are able to achieve the only “free” thing in investing – that is, it enhances risk-adjusted returns, without taking...