Diversification: reduced risk or lower returns?

an diversification ever be bad? I believe that it not only can, but indeed often is for many a private investor's portfolio. Diversification is supposed to reduce risk, but there are situations where it merely lowers returns. Here are the reasons, but first a philosophical point. Many equate risk with volatility, but that just shows how even the language of investment has been subverted by our industry's sales-driven culture. Risk means risk of loss, volatility is merely one mathematically definable formulation, and one with its own pernicious pre-conception, namely that variability in pe...