While it’s commonplace for investors to hold multiple investments in a portfolio – often comprised of mutual funds or ETFs that in turn hold dozens or even hundreds of underlying positions – the reality is that even multi-asset-class portfolios aren’t always really diversified.
The fundamental problem is that holding many different investments that are all aligned to the same “base case” market scenario – and all go up together – may be equally at risk to decline together if an adverse event happens instead.
Written By: Michael Kitces