Stock options trading – Obviously, the investor must recognize that the number of securities held is not the sole test of effective diversification.

An investment company with 100 common stocks, 10 of which represent 50 per cent of the total holdings, is not as broadly diversified as another whose 10 largest holdings make up only 20 per cent of the total. A word about diversification for the individual investor may not be amiss here. Many portfolios show a tendency toward scatteration. An investor with $50,000 in common stocks other than investment company shares need not own between twenty-five and thirty separate issues. The following is not a prescription; conditions change, and price shifts must be considered. Other securities may be substituted, therefore, but the person with a modest amount to invest can obtain a very satisfactory degree of diversification in, say, six or seven securities of the following types: American Telephone & Telegraph; American Electric Power; Westinghouse Electric; Du Pont de Nemours; Sears, Roebuck; National Dairy Products; Texaco.

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