Diversification vs. Concentration: Why Conviction Should Shape Position Size
Diversification is often described as the only free lunch in investing. That’s true—up to a point. If you don’t fully understand what you own, diversification is not just useful, it’s essential. It protects you from your blind spots: wrong assumptions about business quality, hidden balance sheet risks, management missteps, valuation traps, and macro shocks you didn’t model. In that context, spreading your capital across more names lowers the chance that one mistake causes permanent damage. ...