[adios]

[ QUOTE ]
Your first point requires a longer answer which ill get to, but i guess you haven't read "Gambling Theory" because the book does contain explicit discussions about investing and diversification.

[/ QUOTE ]

At one time the book questioned the wisdom of diversificaiton in a stock portfolio. Don't know if that's been fixed since I haven't looked at in awhile. I wrote an essay 1+ years ago that I posted in the BFI forum analyzing the expected returns of an investor that puts all of their money in one stock. Might find it interesting. Anyway portfolio theory states that the investor is compensated with a risk premium by undertaking market risk only. Individual company risk is not compenstated with a risk premium. It is easy to prove mathematically that individual company risk can be diversified away in a portfolio. Put another way, a portfolio of stocks does not need to take on individual company risk. Therefore diversification of a stock portfolio removing individual company risk is desirable since individual company risk is not compensated by a risk premium. I only bring this stuff up because of all the misconceptions that people seem to have on this forum about the stock market.