You might hit the jackpot by holding on to shares in what becomes a hugely successful company. Taking an early profit will enhance your bank account but can prove wealth-destroying. Yet by buying and holding forever, your much-enhanced wealth can become highly and dangerously concentrated. So diversifying your risk by lightening positions in huge outperformers, to hold a mix of shares and other assets, makes wise, risk-reducing sense.

Owners of start-up businesses that have made them fabulously wealthy also have to make choices about how best to invest their wealth. They could diversify their wealth by redeploying dividend and other income received from the original enterprise. By investing in a portfolio of other assets, in a variety of jurisdictions, they reduce their risk. Alternatively, they could adapt the company they control to buy a well-diversified group of unrelated businesses, over which they continue to exercise management control...

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