The Upside / Downside of Diversification

Over on The Motley Fool (for whom I used to write), Malcolm Wheatley asks How much diversification is enough?

First of all, I think there are two reasons to diversify:


On the downside we need to diversify to spread our risk, because any stock can suffer a sudden collapse and take much of our portfolio value with it. If we're going to take Warren Buffett's alternative advice to "put all our