Diversification only works when it serves a purpose. The speaker warns against spreading assets randomly just to satisfy requirements, pointing out that successful investors diversify strategically toward specific goals, not for show.
Right, what we don't want to have happen is that we don't want to have all of our assets tied up in one particular asset class, right? But we want to diversify across different assets. Now, what's important here is that we're not diversifying just for diversity's sake. That's just spreading a little bit here and spreading a little bit there and you're not being strategic and you're not being effective. You're just kind of— and this is why I have such a bugbear with superannuations. Well, one of the many reasons I have a bugbear with superannuation. And also a lot of funds, they just diversify for the sake of diversity because that's what it says they have to do in their charter, right? It literally says that. But the most successful investors in the world don't diversify for the sake of it, right? We don't diversify for diversity's sake. We diversify for a purpose, right? And that's really, really critical and important to understand.
