The last few Mondays have been down on Wall Street.
Last week, the overall market declined on tariff news.
The week before, tech stocks and the Nasdaq took a hit due to the new open-source AI from China called DeepSeek, and illustrated several reasons why diversification is an important tool for investors.
Take a look at NVDA in the above chart from that day. It was down significantly capturing the biggest market cap loss in a single day ever in the United States. If you held a concentrated position in NVIDIA, your portfolio definitely felt it. The gains for long-term holders have been extraordinary, but days like that can be jarring. Concentrated—or less diversified—portfolios can suffer when an individual stock gets hammered.
Notice QQQ, a popular ETF tracking the Nasdaq where NVIDIA ranks among the top three holdings, fell “only” about 3 percent. The benefit of a diversified index fund is ownership of NVIDIA alongside several other companies within.
Meanwhile, government bond fund TLT rose 1%, demonstrating bonds' diversification value.
Notably, Verizon (VZ) and AT&T (T) had strong days. These companies pay higher dividends (unlike many tech-oriented stocks like NVIDIA in the Nasdaq) and can show different price movements as a result of being in a different sector. DIA, the ETF tracking the Dow Jones Index of 30 stocks, also climbed slightly higher.
None of this argues for owning or selling any of these companies or ETFs. It's simply a reminder of why diversification is an important tool in an investor's toolkit.
Remember this quote on any ugly Monday on Wall Street: "The only investors who shouldn't diversify are those who are right 100% of the time."