A number of portfolio strategies followed by practitioners are dominated because they are incompletely diversiﬁed over time. The Payoﬀ Distribution Pricing Model is used to compute the cost of following undiversiﬁed strategies. Simple numerical examples illustrate the technique, and computer-generated examples provide realistic estimates of the cost of some typical policies using reasonable parameter values. The cost can be substantial and should not be ignored by practitioners. A section on generalizations shows how to extend the analysis to term structure models and other general models of returns.