Wow! where to begin... Diversification can be used pretty easily to increase returns, given a certain level of risk, or to reduce risk, given a certain level of return. The problem, though, is that designing a diversified portfolio depends on the assumption that past returns and correlations will hold in the future. Lacking a crystal ball, all we can do is try to guess well when diversifying. Crazy things happen to markets, and there's no way to smooth it out so that your envisioned money machine will be a lock.


You might want to go to the library and read some stuff about portfolio theory/index funds, etc. I also just read "Dumb Money", written by an erstwhile daytrader, and it's pretty funny. Good luck.