Some people have much faith in a company (general electric, general motors - oops, Washington Mutual bank - oops; because they have done so well for so long; and the insider news of management failures does not get out to the public). [nor does the public learn of investment banker's plans to buy and gut a company in time to make like a block of wood and split.] Others have no real choice. Like Enron workers had to have their retirement stock in Enron. {or, at least they were led to believe that.} Most company employees like to invest in the stock of their company. There is also the "too big to fail" idea.
And some people have gotten rich, betting on one stock so others follow suit; with mixed results.
Many funds are "Diversified". There are funds that cover all the world stock markets. Funds that change their asset allocation as you get closer to retirement. "balanced funds", etc. Many of these funds are designed to be well diversified, holding many times 100, 500, 2000 or more individual stocks (companies). There are even funds which hold the entire US stock market. Certainly these all qualify as well diversified.
Because they are trying to "hit the lottery" per se. These types of traders are under the false notion that there's a negative correlation between expected payout and diversification.
Others just don't have any other ideas for investment opportunities.
"Most of people" do NOT invest in a single stock or a single sector fund.
The overwhelming share value in the market is owned by diversified funds. Those funds are owned by individuals.
Your assumption that most people do not diversify is incorrect.
The minority investors who do not diversify are either ignorant or hoping for a quick buck.
Why don't they diversefy?
