What is the fundamental motivation behind portfolio theory

What is the fundamental motivation behind portfolio theory...

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What is the fundamental motivation behind portfolio theory? That is, what are people trying to achieve by investing in portfolios of stocks rather than in a few individual stocks or in debt securities? What do you think will happen in the stock market in the next year? The truth of the matter is that the stock market and other markets are highly unpredictable  over the short run.  Some true experts admit that it’s very hard to predict what will do well in  the near term but we know that over the long run about 10 to 20 years, stocks will go up.  If  you buy a diversified portfolio of stocks and bonds you will do well.  Trying to predict short 
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Unformatted text preview: term economy movements only will make investors to make wrong decisions that will bring bad consequences. As far as the economy is right now, no expert can predict what would happen next year with the stock market. Interests are going down and up, everyday is unpredictable if whether I should invest now or later. For example, In 2004 I bought a property in Florida, after two years, this property double its value and three years later its value went down to 70%. It is hard to ignore how drastically the economy is affecting many people in this country....
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This note was uploaded on 03/12/2012 for the course FINANCE 630 taught by Professor Smith during the Spring '12 term at University of Maryland Baltimore.

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