Why does diversity makes sense for an investor?
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Can you please explain why diversity makes sense for an investor, but not generally for the firm itself?
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Solution Summary
The solution compares diversity for an investor to a company diversification strategy. It is a practical application of basic investment philosophy. For companies, there are notable examples of failures as a result of diversification, including the reasons why.
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In a word, it has to do with control.
When you are relying on others for your investment returns, you would be wise to diversity among types of investments, industries, geographic business, size of business and other such traits. When you have no control over businesses, economies, or world markets, it makes sense to spread your investment ...
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