Explore BrainMass

Explore BrainMass

    Why does diversity makes sense for an investor?

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Can you please explain why diversity makes sense for an investor, but not generally for the firm itself?

    © BrainMass Inc. brainmass.com October 1, 2020, 10:23 pm ad1c9bdddf

    Solution Preview

    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 ...

    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.