Question

Gloria recommends that her friend, who has never invested before, invest all of her money in stocks of respectable, well-known companies, such as J.P. Morgan, Microsoft, or Procter & Gamble. What concept is Gloria neglecting?

Answer 1

Gloria is neglecting the concept of portfolio diversification. Gloria's method suggests to only invest in Blue Chip companies, which are companies which have been long established and ensured. Gloria also suggests putting all of her friend's money directly in the stock market without looking into the other financial instruments like bonds, mutual funds and variable universal life insurance.