Diversification does not mean more schemes, it means different schemes

As published in The Telegraph on 19 April, 2017

Swatantra Kumar explains:

Your cricket team has been losing for a while.

You realise that the team needs more specialists.

You tell your management that you need better players.

The management buys your 2 new batsmen and 3 new bowlers.

They are:

- An opener

- A №3 batsman

- Two fast-bowlers

- One spinner

They all had incredible talent and good performance streaks.

But it still doesn’t help you. Why?

You already had two good openers, a stable upper order, one spinner, and three good fast-bowlers

You needed a good 5th order batsman and a left-arm medium pacer

Case 2:

Imagine you ordered a basket full of apples. This was a gift for a friend or a loved one.

And then it turns out — they are allergic to apples.

If only you have opted for a mixed-fruit basket.

The lesson to be learned?

It’s good that you are investing across multiple options.

But it may not reduce your risk.

You need to ensure you invest across DIFFERENT options.

Sheer numbers can’t help lower your risk.

It’s only the difference in schemes and options that can.

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