“Wide diversification is only required when investors do not understand what they are doing.”
– Warren Buffett
We've all heard the old idiom, “Don't put all your eggs in one basket.” For more than five decades, portfolio diversification has been considered a basic building block of any investment portfolio — with the critical function of reducing risk and dampening volatility. There is a trend toward what may be deemed over-diversification. Should you own a stock in your portfolio to dampen volatility or because of positive underlying fundamentals of a company?