When a portfolio is concentrated in one company, your performance becomes hostage to a single event: a quarterly result, a management decision, or something affecting that sector alone.
Three levels of diversification:
- Across companies: do not let one holding form a large share of the portfolio.
- Across sectors: companies in the same sector usually move together.
- Across markets: a global markets account allows investment beyond a single market and a single currency.
Set each position\u2019s share of the total before you buy, and hold to it when rebalancing.