I see your point, but I don't consider what I said to be contradiction. First of all, I was speaking only in regards to stocks, which do not comprise 100% of my investments. I also own bonds, real estate, and crypto as well as short-term notes. The diversification was only in respect to the equity portion of my investments.
So I suppose there are two types of diversification, and I was speaking about the smaller set. There's diversification across investment types (what the asset is: stock, bond, real estate, commodity, crypto, etc.) and there's diversification across industries which is most commonly (but not exclusively) used in relation to equity investing. If you're invested 50% in stocks and 25% in bonds and 25% in real estate, and all your stocks are in one industry, I wouldn't consider that diversified. You could be well-diversified inside crytpo (10% across 10 different coins) but equating 100% of your investments and I wouldn't consider that diversified in the larger sense either, since crypto by and large is dominated by btc, and whatever btc does it for the most part drags every other coin with it. In equity investing, there are defensive stocks that perform better in recessions than growth stocks which are very dependent on good economic conditions. So there are several ways to get at diversification, but in each case it's going to depend on the facts of the case. I would say a general way to put it is you're diversified if a general event doesn't impact all your investments at the same time. (Exceptions for catastrophic market events, which will drop everything, because you can never be diversified to the point where you never experience losses.)
As to me, this kind of diversification doesn't make a lot of sense for an individual
Note that I specifically point this out since a big investment company (like Berkshire Hathaway) is a totally different matter (obviously, they have quite a few of different individuals). Diversification, as I understand it, serves for profit multiplication at a certain level of risk. If you are looking for capital preservation, you buy gold, and that's pretty much it. Since no one can learn and understand any asset perfectly, it makes sense to invest in no more than 3-4 assets (as I told before) while learning these assets as deep as possible, otherwise you will be wasting time and energy mindlessly shuffling your money between different assets with no real purpose
I suppose I'm on the other side then, as I completely see the point of diversifying. Diversification is mainly about risk management. Investing is about trying to increase wealth, which is essentially taking on risk in pursuit of future reward. In the pursuit of this reward, if you put all your investment eggs in one basket, and that basket breaks, you're ruined. Diversification across investments (or industries) is about making sure that if one of your ideas proves wrong, it doesn't end up in you losing all your money.
Necessarily, diversification likely lowers overall return because it forces you to invest in other areas instead of putting all your money in your "best" investment idea to protect against the possibility that that single idea proves wrong. If you were simply trying to maximize returns, you would identify your best idea, and sink all your money into it. You wouldn't diversify to try and
make money, but to protect you from the some of the risk as you try to make money by taking on risk. Because diversification's aim is risk management, if you just wanted to swing for the fences regardless of risk, you wouldn't diversify at all. That doesn't matter if you're a large corporation or an individual investor. Though large corporations have more money to lose by not diversifying, the money lost by
an individual is more meaningful per dollar because it is so much less.
So as an individual investor, I fully embrace the need to diversify.
Spreading money across different investment types and industries is meant to decrease the likelihood that you lose everything due to a catastrophe
You are again confused about your purposes and means to achieve them
And it shows through. You end your endless post with the words about decreasing the chances that you lose everything due to some disaster. But if that really were your ultimate aim, you would have put your wealth (at least, the part which you don't want to lose no matter what) in gold and get done with that. Otherwise, you are diversifying for profits, as simple as it gets. Indeed, as a smart investor you might understand something about risks, i.e. you understand that investing in highly speculative assets will likely cause severe losses, but that doesn't take anything from my point. You are still diversifying for the purpose of earning more money, not for the purpose of just preserving your wealth. These are the two ends of the same stick