Why diversification is about more than just a mix of assets

In a world where all investment decisions were perfect, there would be no such thing as multi-asset class investing. Our perfect investors, with their 100% foresight, would simply put all of their money into the asset class they knew was going to perform the best and that would be that. However, as we know, the world is not like that – far from it – and even the shrewdest investor does not get everything correct, all of the time. This is where diversification, a cornerstone of modern portfolio theory, steps in. Through holding a varied mix of assets an investor will, in theory, always...