11/29/2005

Diversification isn't for everyone

I came across an article that I found to be very informative, and it dealt with the issue of investment diversification. In Robert Kiyosaki's diversification article, he brought up the notion that diversification can be good, but can also limit one's potential for higher returns. His point was that if you spend a considerable amount of time, and effort in trying to find good investments, you will be able to eliminate some risk, while likely getting higher returns, than if you just simply diversified to reduce risk. I never thought of investing in that light, but I think that he has an excellent point, and I think that his method could be very useful for certain types of investors, proving that many things that happen in the economy are driven by people's behavior.

1 comment:

Dr. Tufte said...

I think you've all missed the big picture. Yes, diversification is good. But the big picture is that by diversifying you can reduce your risk a lot while only reducing your return a little bit.