Diversifying a share portfolio can lose you money ...

Diversification of shares works on the premise that the stock market, because of the rules and regulations, with some effectiveness, weeding out the very financially unhealthy from public company and listed status, will generally, by the aid of the law of large numbers, as a whole, rise slightly, and bring diversified portfolios a slight return of perhaps the famous 10%.

However, there are cases where a diversified investment can lose a lot of money, such as where the fundamentals of a country's economy, or stock market, are bad. Is diversified investment in Zimbabwe or Venezuela or China a good bet? Probably not? What about stock market bubbles, say one created by the simple advice of 'diversify and you can't lose money, but will make 10% a year'? Could it be time for investors to start to look at the fundamentals of companies they invest in, such as their financial statements and market forces, instead of blindly betting on diversification in stock markets which are increasingly reaching record prices, prices which are often well in excess of companies' annual earnings and dividends?