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Diversification of investment is based upon your risk level. If your investment is purely for enjoyment and playing big boy games then you don't really care if you loose it all so you don't need to diversify. Basically, you can put all your money on the horse you think is going to win the biggest you may win big or loose everything. On the other hand and for most of us our investments are our future. Loosing our savings is not an option.
In 2000 the famous dot com bust occurred and millions of people lost most if not all of their retirement in a few short weeks. Sadly, retired college grads were applying to clean toilets at convenience stores just to survive. This situation occurred because financial advisers put all their clients monies in the high return high tech companies. When these over inflated stocks burst their companies were going bankrupt overnight and investors lost everything.
Today, we diversify so that if one investment happens to go bust the gains from the others will compensate for our loss. Simply, diversify so you're not cleaning toilets when you're 80, of course there is no guarantee either way but it seems to be the prudent thing to do.
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