“There should be adequate though not excessive diversification. This might mean a minimum of ten different issues and a maximum of about thirty.”
Most people intuitively understand the need to diversify their investments. It is basically the old cliché of not putting all your eggs in one basket. If you invest in one company and it goes bust then you lose everything. If you invest in 20 or 30 companies and one goes bust then it’s not such a big deal.
Wise diversification is about more than just investing in a number of different companies though, so through the rest of this chapter we will also look at how we can diversify both industrially and geographically.