Question
A friend of mine once told me that he didnt diversify his stock holdings. He said that if he held just one or two stocks,
A friend of mine once told me that he didnt diversify his stock holdings. He said that if he held just one or two stocks, there was a chance that he could double his money in a year, but if he held a portfolio, a return that large was very unlikely. He acknowledged that his approach was very risky, but he said he had a very low degree of risk aversion (OK, actually he said he was willing to take a lot of risk, but I translated). Evaluate my friends argument. Is diversification not a good strategy for someone who is willing to take a great deal of risk for the prospect of a high return? Be brief.
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