To reduce risk it is necessary to avoid a portfolio whose securities are all highly correlated with each other. One hundred securities whose returns rise and fall in near unison afford little protection than the uncertain return of a single security.

A good portfolio is more than a long list of good stocks and bonds. It is a balanced whole, providing the investor with protections and opportunities with respect to a wide range of contingencies.

We next consider the rule that the investor does or should consider expected return a desirable thing and variance of return an undesirable thing.

It's like a crapshoot in Las Vegas, except in Las Vegas the odds are with the house. As for the market, the odds are with you, because on average over the long run, the market has paid off.

In choosing a portfolio, investors should seek broad diversification, Further, they should understand that equities--and corporate bonds also--involve risk that markets inevitably fluctuate and their portfolio should be such that they are willing to ride out the bad as well as the good times.