Dogbert On Modern Financial Theory
Arguably, Dilbert creator Scott Adams is slightly unfair here as you're not supposed to invest in things which are almost certain to be worthless, like sick cows, but only slightly so. Clearly there is an over-belief in the value of diversification in terms of reducing risk. While that may usually be the case, it is often not so. For example, risk was not reduced for Swiss banks who decided to diversify away from the calm Swiss real eastate market, and instead invest in American mortgage backed securities. Similarly, someone who owns stock in stable companies like Coca Cola and McDonald's and instead diversified into stocks like Fannie Mae, AIG and GM didn't see risk reduced either.