Why would you want to buy more than one good investment? Specifically, why not buy the best investment you can find and nothing else? That’s a fair question. Ultimately there is no “best investment” that you can identify beforehand, unless you can time travel.
Because we don’t know the future, classic investment authors Bernstein and Malkiel wisely counsel us to diversify our investments to reduce risk. This has been known for centuries, even millennia: “Don’t put all your eggs in one basket” and Ecclesiastes 11:6,” In the morning sow your seed, and at evening withhold not your hand, for you do not know which will prosper, this or that, or whether both alike will be good.”
If you own a mix of good investments some will do better than others, but a mix greatly reduces your risk of a bad return and increases your likelihood of a good overall return. I.E. Even a good investment can have a bad season, but it’s much less likely that they all will.What investments are the best for diversification? Broad based, low cost passive index funds or ETFs. There are funds based on regions (I favor those with stability and rule of law) and those based on market areas (high technology, biotech). You often get a lot of diversification for free, since large and medium sized companies are usually multinational.
