Question

Mike to sell the shares of the two stocks to purchase stock in other companies.Two years later, Mike owns stock in 14 different companies and views his portfolio as well diversi-fied. His cousin, Ed, who has recently graduated from business school, looks at his portfolio and comments, "You are not very well diversified, as 10 of the stocks you own are considered technol-ogy stocks." Mike tells Ed that he followed his broker’s recommendations and sold his original stocks to purchase the new stocks in order to attain a diversified portfolio. Ed comments that the brokerage firm where Mike does business is noted as a specialist in technologies. Mike is disap-pointed because he thought he was getting good advice toward building a well-diversified portfolio. After all, Mike followed his broker’s advice to the letter, and why would his broker give a client bad advice?a. Comment on Mike’s broker’s ethics in recom-mending the sale of the original stocks to pur-chase a portfolio weighted so heavily toward technologies. Include in your discussion rea-sons why the broker may have followed the course of action that he did.b. To achieve diversification, what other course of action could Mike have taken that would not involve buying individual stocks in a variety of companies? g

Answer 1

Answer:

the broker may have leaned towards the technological stocks because of their current popularity. while he did not do what he was asked or get permission first. he could always invest in whats the most current.

Explanation: