The theory is that all known pros and cons are priced in; unless you're a big enough player to move the market, investing a dollar in any one company is as good as investing in any other. This assumes a perfect market and is therefore pretty dumb, but the guys that move the prices are probably better at pricing risk and upside than I am, so I can't take advantage of the gap between theory and practice anyway.
The upside of diversification is that your return simply get closer to the mean as opposed to varying wildly as it would if invested in a single company's stock. You basically get increased predictability at no cost.
The upside of diversification is that your return simply get closer to the mean as opposed to varying wildly as it would if invested in a single company's stock. You basically get increased predictability at no cost.