Understanding The Concept Of Diversification
Many of the great investors in history, have always talked about the need to focus on one thing that you know that you're good at, and not diversifying in different things that you have no solid understanding about. But in recent times, people go the opposite route.
Here's a famous quote by Warren Buffett, "Diversification is protection against ignorance. It makes very little sense if you know what you are doing." What Warren Buffett was driving at is that only ignorant people tend to diversify a lot, into many separate businesses.
And when you look around you, at the society - you can observe that the richest men, actually are professionals in one field. They've understood that it's much better to invest big into a business that you already understand, than it is diversifying.
When you take a minute to imagine a person who has done all his investigations, and study about a business; you can see that such a person knows the in and out of that business. And his tendency of making profits are higher in that line of business.
Thus, it may be worth thinking about next time when you hear someone talking so much about diversifying. Because if he knew exactly what he was doing, he'd tend to focus on it - and expand on it. The most successful people focus on one thing until they succeed in it.