True or False: Increasing the number of stocks in a portfolio
reduces market risk.
A) True
B) False
Consider two stock portfolios. Portfolio A consists of four
different stocks from firms in different industries. Portfolio B
consists of 10 different stocks, also from firms in different
industries. The return on Portfolio A is likely to be 1)
________ (MORE or LESS) volatile than that of Portfolio
B.
Suppose a stock analyst recommends buying stock in the following
companies:
Company
Industry...
1-risk and portfolio
How we decrease the risk in a portfolio? What actions should we
follow?
2-investor and stock markets
What is the biggest fear for an investor? In your opinion, what
is it that should bother the investor the most?
Explain the graph below.
Talk about market risk, firm-specific risk, diversification and
number of stocks in a portfolio
Does that mean you need to buy at least 20 stocks? What are the
possible scenario that someone is not diversified at all with more
than 20 stocks in his/her portfolio?