ABSTRACT
This chapter discusses the necessity for considering costs while striving for diversification. In markets, diversification may be achieved through the use of Standard & Poor's Depository Receipts and DIAMONDS and similar instruments at comparatively reasonable costs. Diversification is important because technical patterns do not always carry out their original promise. Intelligent diversification calls for study of the costs of buying and selling stocks, especially in small quantities. People might wish to have a portfolio of stocks representing the entire Dow–Jones Averages, or a selection that includes at least one stock of every major group. By diversifying, people are protected by the law of averages against all of their holdings going the wrong way, except in the case of some Reversal affecting the entire market or a large segment of it. Index funds and mutual funds also represent diversification and cost control for the general investor.
