Diversification in investments

Many people say that the more diversification in investments, the better. But it is not a good rule to adopt blindly. Imagine that your lifetime income was correlated with the income of people in your college class, and that, in your final year of graduation, you had to allocate 100% from your source of income among your peers, so that you could choose just one person and have exactly the same income as that person, choose 3 people and have 1/3 of the income from each of them, and so on. You shouldn't put 100% on the best student, because he could have an accident and have no more income even if he was a genius. But you also don't want to spread your percentage points across the bulk of the class. After years of studying with your crowd, you have a good idea of who the best people are. And the best investment would be to choose some of them. This scenario changes if you have to invest your 100% in another group of unknown people. Without knowing anything about them, allocating the same percentage to all of them is the best possible decision. That is, broad diversification is a protection against your own lack of knowledge. If you understand very well where you are investing, you shouldn't spread your capital among dozens and dozens of opportunities. Increasing your knowledge is the best way to control risk.