Question

Why should you avoid investing all your money in familiar stocks?

A.
to increase the value of your returns
B.
to research unfamiliar industries that might reveal good investment opportunities
C.
to avoid selling at a loss
D.
to avoid diversifying into multiple investment options

Answer 1

Why should you avoid investing all your money in familiar stocks?

A.

to increase the value of your returns

B.

to research unfamiliar industries that might reveal good investment opportunities

C.

to avoid selling at a loss

D.

to avoid diversifying into multiple investment options

Explanation:

Answer 2

B.

Explanation:

The main reason for this is to research unfamiliar industries that might reveal good investment opportunities. When you conform to what you know, you fall into a comfort zone. This prevents you from taking the time to investigate and learn new things. In this scenario, investing everything in familiar stocks will prevent you from looking for new investment options in different industries which could have led to incredible investment opportunities. Therefore, it is a better choice to invest a large portion in safer familiar stocks but leave a certain percentage for riskier and newer investments.