It's sometimes good to get back to basics.
When it comes to investing money, one of the most basic yet important concepts is diversification.
The alternative - putting all of your eggs into one basket - is a high risk approach which is entirely inappropriate for most if not all investors.
By diversifying a portfolio across multiple stocks or funds, regions and asset classes, you reduce risk to more tolerable levels without dramatically reducing the potential for long-term returns.
The article below references a study carried out by JPMorgan earlier this year and reports that, between 1980 and 2014, nearly 40% of all stocks in the Russell 3000 index suffered permanent 70% declines from their peak values.
Unless you diversify your portfolio, you run the very serious risk of ending up in a stock, sector or asset class which falls in value and fails to recover within an acceptable timescale.
By spreading your investments across multiple asset classes, you benefit from the handful which perform extremely well during your investment time horizon.
With the JPMorgan study finding that, on average, 74% of concentrated investors would benefit from additional diversification, there's never been a better time to consider this basic tenet of investing.
The figures produce a shocking revelation, which should scare every investor away from having an extremely concentrated portfolio.