In the history we have seen too many examples of investors ignoring diversification of their portfolio. For example in the US many people invested all their money in Enron, even worked there and put their retirement funds only in Enron. We all know what happened to Enron: the company got bust due to big frauds so all investors lost all of their money. The same also happened in Belgium where many investors put all of their money in stocks from Dexia and Ageas . Of course they can defend their choices they made by claiming that the banks had high ratings, paid huge dividends, had higher revenues and profits etcetera. But in the end every company can go bankrupt and I am very sure also in the future we will see these kind of totally not diversificated portfolios with catastrophic results unfortunately.
But how to diversify? The answer for this is not that easy. Maybe too many reports have been written about this asset allocation subject. Of course you should diversify your stock portfolio but you should also diversify your total portfolio by also investing in bonds and in cash. As a rule of thumb many people say that the percentage of stocks in your portfolio should be equal to 100% minus your age. So a person of 50 should only 50% of his whealth in stocks and the rest in lower risk investments like cash and bonds (preferably government bonds).
In another video we elaborate more about asset allocation.