The meaning of ‘diversification’ when it comes to ASX shares

Diversification… Here we have one of those sharemarket ‘buzzwords’ that is probably thrown around a bit more than it should be. Every fund manager on the market will tell you about the importance of diversification, and perhaps how every one of their investment portfolios is ‘diversified’.

But then you have legendary investors like Warren Buffett, who has said that “diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing”.

So what’s the deal on the D?

Diversification and its benefits

So the whole idea of diversification comes from risk management. The concept revolves around the simple proposition that if one of your investments gets hit by the proverbial…