{"id":206,"date":"2026-05-04T11:08:08","date_gmt":"2026-05-04T15:08:08","guid":{"rendered":"https:\/\/people.bsu.edu\/econbriefs\/?p=206"},"modified":"2026-05-04T11:08:08","modified_gmt":"2026-05-04T15:08:08","slug":"diversify-or-bust-by-dr-cecil-bohanon-and-dr-john-horowitz","status":"publish","type":"post","link":"https:\/\/people.bsu.edu\/econbriefs\/2026\/05\/04\/diversify-or-bust-by-dr-cecil-bohanon-and-dr-john-horowitz\/","title":{"rendered":"Diversify or Bust\u2013 by Dr. Cecil Bohanon and Dr. John Horowitz"},"content":{"rendered":"<p><span data-contrast=\"auto\">A twenty-something friend of ours wants to set up a small fund for a newborn niece. He asked us what\u00a0he should\u00a0invest in.\u00a0We offer the following\u00a0millennial\u00a0story. Two cousins, Jay and Zeke,\u00a0each\u00a0inherited $10,000 from their grandpa.\u00a0On January\u00a02, 2001,\u00a0the first business day of the new millennium,\u00a0they went to a stockbroker.\u00a0Grandpa\u00a0told\u00a0both\u00a0that common stocks were the best\u00a0long-term investment, but don\u2019t put all your eggs\u00a0in one basket.\u00a0<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Both guys thought\u2014OK. Put half in a speculative stock with good prospects for growth and half in a\u00a0safe\u00a0stock. Reinvest the dividends and wait 25 years.\u00a0Zeke speculated that down-on-its-luck computer company Apple was a good bet, and that\u00a0nothing could be safer than shares in Coca-Cola. Jay speculated that Enron,\u00a0then\u00a0the\u00a0darling of Wall Street, was likely to continue its spectacular growth,\u00a0and\u00a0nothing could be safer than good old Sears and Roebuck. The guys\u00a0embarked on an adventure trip on January 3, 2001,\u00a0and got stranded on an island,\u00a0only to be rescued in early 2026.\u00a0What do they find when they come home? Their outcomes could not be more different.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Zeke comes home\u00a0to\u00a0Apple stock worth over\u00a0$4.6\u00a0million, yielding nearly $20k in annual dividends, and Coca-Cola stock\u00a0is worth around\u00a0$12k,\u00a0yielding just over $350\u00a0in annual dividends. Jay,\u00a0on the other hand,\u00a0comes\u00a0home to nothing:\u00a0both Enron and Sears\u00a0went\u00a0under,\u00a0and the stocks are worthless.<\/span> <span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Was grandpa wrong? Well no. The story\u00a0illustrates\u00a0the pitfalls of inadequate diversification\u00a0and the\u00a0incredible\u00a0potential of an informed but\u00a0lucky guess.\u00a0Had\u00a0both\u00a0guys invested half in an index fund\u00a0tracking the Dow Jones Industrial Average and half in an index fund tracking the NASDAQ, they would each have around\u00a0$100,000\u00a0and earn\u00a0just\u00a0under $900\u00a0in annual dividends in 2026. Investing\u00a0$10k\u00a0in\u00a0a\u00a0safe\u00a0zero-coupon\u00a0US\u00a0bond back in 2001 would\u00a0yield\u00a0$38,000.\u00a0Neither\u00a0bank savings accounts\u00a0nor\u00a0CDs would have even kept up with inflation, as it takes $18,452 to buy\u00a0what $10,000 would buy in 2001.\u00a0<\/span><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Of course,\u00a0had they collaborated and each put one quarter into the four stocks: Apple, Enron, Sears,\u00a0and Coca-Cola,\u00a0they\u2019d each have over $2 million.\u00a0Going from 2 to 4 stocks\u00a0staves\u00a0off\u00a0a disaster,\u00a0but hindsight\u00a0is always 20\/20. To get high returns, one must risk\u00a0losing it all. The key: diversify, diversify, and then diversify some more!<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A twenty-something friend of ours wants to set up a small fund for a newborn niece. He asked us what\u00a0he should\u00a0invest in.\u00a0We offer the following\u00a0millennial\u00a0story. Two cousins, Jay and Zeke,\u00a0each\u00a0inherited $10,000 from their grandpa.\u00a0On January\u00a02, 2001,\u00a0the first business day of the new millennium,\u00a0they went to a stockbroker.\u00a0Grandpa\u00a0told\u00a0both\u00a0that common stocks were the best\u00a0long-term investment, but don\u2019t [&hellip;]<\/p>\n","protected":false},"author":112,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[441],"tags":[1780,1775,1781,1520,1778,1776,1782,1779,1777,45],"class_list":["post-206","post","type-post","status-publish","format-standard","hentry","category-investment","tag-apple","tag-diversification","tag-enron","tag-financial-literacy","tag-index-funds","tag-investing","tag-long-term-investing","tag-portfolio-strategy","tag-risk-and-return","tag-stock-market"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Diversify or Bust\u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/people.bsu.edu\/econbriefs\/2026\/05\/04\/diversify-or-bust-by-dr-cecil-bohanon-and-dr-john-horowitz\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Diversify or Bust\u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs\" \/>\n<meta property=\"og:description\" content=\"A twenty-something friend of ours wants to set up a small fund for a newborn niece. 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