The usual reason is compounding. If you have an asset that is growing over time, paying taxes from it means not only do you have less of it now, but the amount you pulled out now won’t compound indefinitely into the future. You want to compound growth for as long as possible on as much capital as possible. If you could diversify without paying capital gains you would, but since the choice is something like, get gains on $100 in this one stock, or get gains on $70 in this diversified basket of stocks, you might stay with the concentrated position even if you would prefer to be diversified.
The usual reason is compounding. If you have an asset that is growing over time, paying taxes from it means not only do you have less of it now, but the amount you pulled out now won’t compound indefinitely into the future. You want to compound growth for as long as possible on as much capital as possible. If you could diversify without paying capital gains you would, but since the choice is something like, get gains on $100 in this one stock, or get gains on $70 in this diversified basket of stocks, you might stay with the concentrated position even if you would prefer to be diversified.