The Myth of Diversification: When ‘Owning Everything’ Is Just Owning More Dead Weight

More Stocks ≠ More Safety

One of the most overused — and misunderstood — ideas in investing is diversification. It’s become gospel: “Don’t put all your eggs in one basket.” The implication is clear — the more assets you hold, the safer you are. But when you look closely at how most people apply this principle, especially in the stock market, it starts to fall apart.

What most investors think of as diversification is really just owning more of the same thing. Buying a broad index like the S&P 500 may give you exposure to 500 different companies, but they’re all from the same asset class: large-cap U.S. equities. They’re all denominated in U.S. dollars, all tied to the same market cycle, and mostly influenced by the same macroeconomic forces.

True diversification means spreading capital across different asset classes — like stocks, bonds, real estate, commodities, and even cash or currencies. That’s diversification. But owning 500 stocks in the same asset class? That’s not diversification — it’s just dilution.

Here’s the kicker: within the S&P 500, a handful of companies drive most of the returns. In many years, it's just the top 10–20% of stocks pulling the entire index upward. The rest — hundreds of companies — are either flat or actively dragging down performance. So when you “buy the market,” what you’re really doing is buying a few winners… and a lot of dead weight.

And that drag is measurable. It's built into the design. Index funds are structured to match the market, not beat it. That means you inherit the good, the bad, and everything in between — and the underperformers chip away at your compound growth over time.

This is why I don’t believe in owning “everything.” I believe in owning only what’s worth owning. If you’re going to invest in U.S. equities — which remain one of the most powerful wealth-building tools available — it makes more sense to identify the best performers within that asset class and focus your capital there.

That’s the logic behind the Lunar Landing Portfolio. It’s made up of 15 high-conviction U.S. stocks — companies showing real strength, strong fundamentals, and sector leadership. Instead of spreading thin, I allocate with purpose. And the results speak for themselves.

The market rewards focus. It punishes clutter. Diversification may protect against catastrophe in theory, but in practice, most investors use it to justify owning too many stocks they don’t understand, can’t track, and would never choose on their own.

You don’t need to own the whole haystack when you can target the needles that actually move the needle.

If you’re ready to stop settling for average — if you’re ready to focus on performance, not padding — consider upgrading to the premium tier. You’ll get full access to the Lunar Landing Portfolio, monthly trade updates, allocation strategy, and insight into what’s coming next.

👉 Upgrade to Premium Now — and start investing like you actually want to beat the market.