|
Company |
Prices as of 18 th January 2019 ($) |
Prices as of 30 th January 2019 ($) |
Lowest Record between the period ($) |
|
Wells Fargo |
49.10 |
49.84 |
48.86 |
|
Citi |
20.47 |
20.78 |
20.47 |
|
Chase Bank |
103.77 |
104.14 |
102.94 |
Bank of America |
29.02 |
29.42 |
28.71 |
Figure 1. The New York Stock Exchange 2019
The companies above have relatively stable stock prices with a relative increase over the month of January. Investors expect an increase in stock prices over the coming months. Compared to each other, Chase bank is expected to have the highest earning per share because it has the highest-priced stock prices. The Bank of America, on the other hand, has low prices. For maximum returns, an investor would prefer Chase Bank.
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Different portfolios all in the same industry exposes investors to not only systematic but also diversifiable risks. At their core, systematic risks affect all companies regardless of the portfolio of the industry and other factors such as interest rates or earnings per share. Diversifiable risks, on the other hand, are specific for a company or industry. Regardless of the company, the portfolio will be affected by systematic risks. Such companies as Well Fargo, Citi, Bank of America, and Chase Bank may be different but their provision of financial services makes them highly correlated. Therefore an investor cannot achieve a diversified portfolio by holding companies in the same industry (Lhabitant, 2017). It is advisable to diversify across the board in different companies and industries to achieve a diversified portfolio. It is risky to have diversification in different companies under the same industry due to market swings (Sharma, 2019). However, one can consider diversity in various assets for companies in the same industry. For instance, stocks and bonds markets act differently to similar adverse events in the market.
References
Lhabitant, F. S. (2017). Portfolio Diversification . Elsevier.
Sharma, S. (2019). DIVERSIFICATION APPLICATIONS IN PORTFOLIO MANAGEMENT (Doctoral dissertation).
