Which characteristic is essential for a good investment strategy?

A good investment strategy should indeed focus on diversification and alignment with financial goals. Diversification helps spread risk across different asset classes, sectors, or geographic regions, reducing the potential impact of poor performance in any single investment. By not putting all your eggs in one basket, you can achieve a more stable overall return and minimize volatility.

Furthermore, aligning investments with personal financial goals ensures that the strategy is tailored to the investor's specific time horizons, risk tolerance, and return requirements. This personalized approach helps maintain focus and provides a clear pathway to achieving financial objectives, whether it’s saving for retirement, a home, or children’s education.

In contrast, specialization in a single asset type may lead to higher risk concentration, as market fluctuations can severely impact that specific type. Minimizing all risks at any cost might lead one to miss out on lucrative opportunities. Lastly, focusing solely on short-term gains can lead to impulsive decisions that stray from long-term financial planning and wealth accumulation strategies. Thus, the combination of diversification and goal alignment forms the foundation of a sound and effective investment strategy.