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We see it all the time. Most investors think they’re diversified because they own a bunch of stuff. A dozen stocks, a couple of funds, maybe some bonds. On paper, it looks good. In reality, it’s often just noise.
The problem? Real diversification isn’t about owning more. It’s about owning things that don’t all move the same way.
Look at 2022. Stocks tanked. Normally, bonds cushion the blow. Not that year — they sank more than ~13%. Portfolios that looked “balanced” suddenly weren’t. Everything went down together.
And that’s when many investors learn the hard way that their diversified portfolio is really just a crowded trade.
At Seven Hills, we don’t count holdings to measure diversification. We study correlation — how assets move in relation to one another. If two things always rise and fall together, that’s not diversification. Protection only happens when one zigs while the other zags.
That means in a properly built portfolio, you’ll always own something going up and something going down. It can feel uncomfortable, but it’s exactly what helps smooth returns and protect you when it matters.
You don’t need 100 positions. You need 10–15 that are truly uncorrelated. Owning Apple, Google, Microsoft, and Meta? That’s not diversification — that’s one big bet on U.S. tech.
Think of your portfolio like a bridge. A strong bridge spreads its weight evenly across every span — not just one. Same with investing: mix businesses, industries, countries, and asset types that respond differently under stress.
Public and private. Equities and credit. Gold and bitcoin. Growth drivers and defensive hedges.
Because real diversification isn’t about owning more. It’s about owning differently. And when the market tests your foundation, you’ll want a bridge that’s still standing when the water rises.
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