While you are home for fall break, your grandfather tells you that he has purchased the stock

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While you are home for fall break, your grandfather tells you that he has purchased the stock of two firms in the automobile industry: Toyota and Ford. He goes on to discuss the merits of his decision, and one of the points he makes is that he has avoided the risk of purchasing only one company's stock by diversifying his holdings across two stocks. What do you think of his argument? Be specific and describe to your grandfather what you have learned about portfolio diversification.
Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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Financial Management Principles and Applications

ISBN: 978-0134417219

13th edition

Authors: Sheridan Titman, Arthur J. Keown, John H. Martin

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