to date on their families , when the subject of investments came up . Each had always been fascinated by the stock market , and now that they had achieved some degree of financial success , they had begun actively investing . As they discussed their investments , Walt said he thought the only way an individual who does not have hundreds of thousands of dollars can invest safely is to buy mutual fund shares . He emphasized that to be safe , a person needs to hold a broadly diversified portfolio and that only those with a lot of money and time can achieve independently the diversification that can be readily obtained by purchasing mutual fund shares . Shane totally disagreed . He said , ― Diversification ! Who needs it ?‖ He thought that what one must do is look carefully at stocks possessing desired risk-return characteristics and then invest all one ’ s money in the single best stock . Walt told him he was crazy . He said , ― There is no way to measure risk conveniently — you ’ re just gambling .‖ Shane disagreed . He explained how his stockbroker had acquainted him with beta , which is a measure of risk . Shane said that the higher the beta , the more risky the stock , and therefore the higher its return . By looking up the betas for potential stock investments on the Internet , he can pick stocks that have an acceptable risk level for him . Shane explained that with beta , one does not need to diversify ; one merely needs to be willing to accept the risk reflected by beta and then hope for the best . The conversation continued , with Walt indicating that although he knew nothing about beta , he didn ’ t believe one could safely invest in a single stock . Shane continued to argue that his broker had explained to him that betas can be calculated not just for a single stock but also for a portfolio of stocks , such as a mutual fund . He said , ― What ’ s the difference between a stock with a beta of , say , 1.2 and a mutual fund with a beta of 1.2 ? They have the same risk and should therefore provide similar returns .‖ As Walt and Shane continued to discuss their differing opinions relative to investment strategy , they began to get angry with each other . Neither was able to convince the other that he was right . The level of their voices now raised , they attracted the attention of the company ’ s vice president of finance , Elinor Green , who was standing