although it is only one tool in the risk manager toolbox, it is useful in the sense that diversification helps avoid what is known as "gambler's ruin" which, in finance terms, is the one big bet that goes awry and wipes you out completely. in the parlance of your generation - "game over".In one sense I'm exposed to gambler's ruin, having all my longterm investments in the S&P 500 (at least it's not the NASDAQ). But in another sense, even the complete destruction of that asset doesn't take away my other biggest financial asset: earning power.In short, I can afford a "gambler's ruin" scenario, so it's not something I have to avoid-at-all-costs. (I certainly WANT to avoid it, and if there's a way of doing it that won't limit my returns, I'd love to try it.)
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