- Diversification is not about the number of assets but their independence. Ten stocks from one market is not diversification but concentration. The goal is for assets not to fall at the same time.
- Three levels of diversification: by class (deposit, bonds, stocks, property), by currency (not everything in one currency) and by country (not everything in one economy).
- Overseas property closes two levels at once: it is a different asset class and a different country with a different income currency, so it is often used as a diversification tool, not only for yield.
- Over-diversifying is also harmful: 30 random assets cannot be controlled. A sensible number is 4–6 independent pillars, each of which you watch.
«Do not put all your eggs in one basket» everyone has heard, but few apply it correctly. Diversification is not about the number of assets but their independence from each other. Ten stocks from one market in one currency is not diversification but concentration with a nice view. We break down three levels of diversification and where overseas property fits in the picture.
The point is not number but independence
The goal of diversification is for assets not to fall at the same time. If one drops, another holds the portfolio. So what matters is not how many assets you have but how independent they are. Tech stocks fall together. Stocks and bonds often behave differently. Property in another country lives by its own cycle.
Three levels of diversification
| Level | What we spread | Why |
|---|---|---|
| By class | deposit, bonds, stocks, property, gold | classes react to crises differently |
| By currency | not everything in one currency | reduce dependence on one currency's rate |
| By country | not everything in one economy and jurisdiction | reduce country and regulatory risk |
Most investors diversify only the first level and forget the second and third. Yet it is currency and country that protect against the most painful risks: a national currency's depreciation and local shocks. How to spread by currency is covered in currency diversification of savings.
Overseas property closes two levels at once
Overseas rental property is convenient because one asset closes two levels of diversification: it is a different class and a different country with a different income currency. So it is often taken not only for yield but as insurance against concentration in one economy. The class is covered in overseas property as an asset class, and a villa's place in a portfolio in a villa in an investment portfolio.
If income, savings and assets are in one currency and one country, you do not have a portfolio but one big bet.
Overdoing it is also harmful
The opposite mistake is to overdo it. Thirty random positions cannot be controlled, and yield is diluted to the market average minus commissions. A sensible balance is 4–6 independent pillars, each of which you understand and watch. Property usually takes a share you are prepared to hold illiquid for years for the cash flow.
Bottom line: diversification is not a collection of assets but a set of independent pillars. Spread across three levels: classes, currencies, countries. Most forget currency and country, yet those protect against the most painful risks. Overseas property is convenient because it closes two levels at once. But do not overdo it: 4–6 clear pillars beat thirty random ones. If you would like to understand how an income villa in Bali would fit your portfolio, write to us.
This material is for information only and is not individual investment or financial advice. We are not financial advisers. Determine the portfolio structure and shares with your own adviser.
Sources: DOMA project canon, the DUVI index (issue 1, July 2026). Diversification principles are given as well-known tenets of portfolio theory and are not individual advice.
FAQ
What is diversification in simple terms?
It is spreading capital across assets that do not fall at the same time. The point is not quantity but independence: if one asset drops, another holds the portfolio. Ten stocks from one market is not diversification. This is not individual advice, build the portfolio structure with your own adviser.
How do you diversify a portfolio properly?
Across three levels at once: by asset class (deposit, bonds, stocks, property), by currency (not holding everything in one) and by country (not depending on one economy). It is sensible to have 4–6 independent pillars rather than dozens of random positions that cannot be watched.
Why diversify by currency and country?
To reduce dependence on one economy and one currency. If your income, savings and assets are in one currency, you depend on it entirely. Income in hard currency from another country reduces this risk. More in the article on currency diversification.
Does property help with diversification?
Yes, overseas property closes two levels at once: it is a separate asset class and a different country with a different income currency. So it is often taken not only for yield but to reduce country dependence. Covered in the article on overseas property as an asset class.
Can you overdo diversification?
Yes. Thirty random assets cannot be controlled, and yield is diluted to the market average minus commissions. A sensible balance is a few independent pillars, each of which you understand and watch.
How much to put into property in a portfolio?
There is no single norm, the share depends on your age, goals and acceptable risk. Property is usually taken for a share you are prepared to hold illiquid for years for the cash flow. Determine the specific share with your own adviser.