The only 'free lunch' in investing — Nobel Prize winner proved it mathematically

Harry Markowitz won a Nobel Prize for proving something elegant: diversification reduces risk without proportionally reducing returns. He called it the only "free lunch" in finance.

The math: if you hold 30+ uncorrelated stocks, you eliminate most unsystematic risk (the risk specific to individual companies). What remains is systematic risk — broad market movements that affect everything.

But true diversification isn't just "own lots of stocks." You want assets that don't move together. When stocks crash, bonds often rise. When US markets dip, international markets might hold steady. A classic simple portfolio: 60% stocks, 40% bonds — though many modern advisors suggest shifting this ratio based on your age and risk tolerance.