Diversification Is Humility
What are you assuming when you concentrate?
The idea
Spreading holdings is an admission that you cannot reliably tell in advance which will do well.
In the real world
A concentrated position that works looks like skill until the one that does not arrives.
Going deeper
Diversification is a response to not knowing which holdings will do well, which is a more honest position than most concentrated bets rest on. It requires holdings driven by different things, not simply several of them.
The employer-shares case shows why the correlation matters more than the count. Holding most of your savings in the company that also pays your salary means one bad outcome removes both at once, and it is precisely the outcome where you would most need the savings. Counting positions measures variety; asking what would have to go wrong measures exposure.
Where it stops applying
Diversification reduces the range of outcomes in both directions, so it necessarily forgoes the concentrated bets that produce exceptional results. That is the trade, not a flaw.
Why it matters
It frames diversification as a response to uncertainty rather than as timidity.
Try this today
Check what share of your holdings sits in your single largest position.
Test yourself
Someone holds most of their savings in their employer's shares and points to strong performance. Beyond concentration, what is the extra risk?
Show the answer
Their income and their savings depend on the same company, so a bad outcome removes both at once. Diversification is about not needing to be right; here even the correlation between the two exposures has been ignored.
Learn this in the feed Answering from memory, then again days later, is what makes it stick.