The Fallacy of Diversification: How “Diworsification” Breeds Index Mediocrity

Modern Portfolio Theory has sold investors a comfortable, pervasive lie: that expanding an equity portfolio across hundreds of assets is the only reliable path to risk management. In practice, this structural dogma frequently transitions from prudent risk reduction into financial self-sabotage—a compounding drag on long-term capital wealth known as diworsification. For specialized quantitative investors, understanding…

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