How to achieve adequate diversification in investing

THE saying – diversification is the only free lunch in investing – holds a lot of truth.

Coined by the renowned economist Harry Markowitz, it emphasises how you can manage risk effectively without sacrificing potential returns. At its core, investing is about putting your money to work to generate solid long-term returns while avoiding unnecessary risk.

Risk refers to the chance of losing your capital permanently. But how do you diversify your portfolio effectively? While the advantages of diversification are clear, are there any potential downsides to this strategy?