Summary
The Merits Of A Diverse Portfolio
Mr X owns several apple orchards and a factory that makes jam. The people of the country in which he lives love apple jam, and do not mind that its price increases every year. However, canny businessman that he is, X knows that it is only a matter of time before the market's preference changes. Market intelligence at his disposal suggests that a new trend, a preference for orange juice, will evolve over the next few years. And while the demand for this is likely to be limited, it goes on to say, people won't mind paying a premium for orange juice (which can be made in the same factory in which X makes the jam). Now X doesn't grow oranges, but he knows where he can barter some apples for them, and so, he goes ahead and does just that.See the full content of this document
Extract
The Merits of a Diverse Portfolio
X's decision to move from apple jam to apple jam and orange juice is, at one level, not very different from promoters selling some of their stock, or using the dividend from it, to diversify into other asset classes. Diversify, promoters must. While any transaction of theirs pertaining to their own stock continues to be viewed with a ce...
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