How best to balance your portfolio

Spreading your investments has been called the last free lunch in finance. But as Matthew Partridge explains, you can take diversification too far.

"Don't put all your eggs in one basket" sounds like sensible advice. Almost all investment guides extol the benefits of diversification, which has been called "the last free lunch in finance". However, you can take diversification too far.

There is evidence that beyond a certain point the benefits of spreading your bets start to diminish sharply, while the industrialist Andrew Carnegie famously advised his friends that "the way to become rich is to put all your eggs in one basket and then watch that basket". So which side should you take in the battle between diversification and concentration?

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Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri