A few weeks back, Fred Wilson had a post up on the power of Diversification. He has some great guidelines to follow.
Diversification is not a simple concept. It’s overused in the investing world much like ‘unjust’ in the political world.
Great wealth comes from a concentration of assets, good timing and a little luck. I think being consistent is the best diversification. Having a good mix of assets along the liquidity timeline is smart as well.
The Wikipedia definition (just for finance) gives me a headache.
If you invested in a ‘diversified’ portfolio of ‘social media’ darlings $FB $ZNGA $LNKD $GRPN and $P as well as a few Russian and Chinese IPO’s for a little extra ‘Global’ diversification, you have been blitzkrieged.
If you invested in a simple basket of companies benefiting from the social media trend, here is mine built during the summer panic of 2011 ($SWEB), you are doing well. It has a bunch of losers of course, but is ‘diversified’ :) .
I wish I had the simple answer…