Does diversification hurt my returns by keeping me from concentrating in the best stocks?

In hindsight, concentrating in the eventual winners always looks better, but that's survivorship bias, you don't know in advance which stocks will be the winners. Most individual stocks actually underperform the market; research by Hendrik Bessembinder found that a small fraction of stocks drove nearly all the market's long-term gains, and missing them is easy. Diversification guarantees you own those winners.

Yes, diversification means you'll never have the bragging-rights returns of someone who happened to bet everything on the right stock. But it also means you avoid the far more common outcome: betting on the wrong one and getting crushed. Diversification trades a tiny chance of spectacular results for a high chance of solid, reliable results. For building wealth you'll actually keep, capturing the market's overall return without catastrophic single-stock risk is the smarter deal.