Remember the saying, "Don't put all of your eggs in one basket"? The old adage summarizes the importance of diversification in a nutshell (or maybe in an eggshell). Diversification doesn't eliminate your risk but can help lower the odds of significant losses. 

At first glance, you might think that Warren Buffett is a proponent of diversification. His Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) holdings include nearly 50 stocks across a variety of industries. But while the legendary investor doesn't have all of his eggs in one basket, a disproportionate number of them are. Why has Buffett invested 44% of his portfolio in just one stock? 

Image source: The Motley Fool.

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Source Fool.com