Many investors believe they are diversified because they hold fifteen lines. If those fifteen lines react to the same events, they hold one position cut into fifteen pieces.
Diversifying means varying the nature of the risk
Real diversification combines assets that do not depend on the same drivers: equities, bonds, real estate, cash, and possibly an operating business. The goal is not to maximise return, it is to make sure a bad scenario does not hit everything at once.
Currency is a position in itself
For a French speaker invested in the United States, exposure to the euro dollar rate is a position, whether it was chosen or not. It deserves to be looked at as such, not treated as an accounting detail.
Tax belongs inside the allocation
Two investments with identical gross returns do not deliver the same net return once the applicable regime, country of residence and tax treaty are applied. Bringing tax into the allocation, rather than discovering it at year end, often reorders the options.
This article sets out general principles and does not constitute investment advice.