Common stocks of good companies may not be good investments because:
I. The stocks may be overpriced compared to other stocks with similar risks.
II. Empirically, stocks which have performed well in the past tend to produce lower-than-expected returns in the future.
III. Good companies frequently happen to be large stocks which are low risk and do not provide very high rates of return.
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A. B. C. D. E. F. G.D
Even if a company is good, the market could temporarily elevate the price above that consistent with its risk. In that case, the stock is overpriced and it may not make sense to buy it, though that decision still must be based on a portfolio diversification context.