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Cotter On Investing: Taking the bull out of the markets: practical advice and tips from an experienced investor by John Cotter

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Chapter 6: Diversification

An old English proverb:

‘don’t put all your eggs in one basket’

helps illustrate what diversification is all about in the investment world. The reduction of risk by the spreading of investments and avoiding having too much of your money in one place. Instead of a basket, in this context substitute one share, one sector, one country or one asset class.

This principle of diversification sits at the very core of investment management and a diversification policy successfully implemented is one of the main features that differentiate investment from gambling.

A story of false diversification

I met a lady some years ago who had a substantial number of shares in one company, Barclays Bank. I spoke to her about the ...

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