If every single stock sits inside the three-stock bullet, why would anyone still put all their money in their favourite company?
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Single stocks sit inside the three-asset bullet
Sketch the GM, IBM and Motorola bullet with the three stocks as interior dots, mark the efficient upper branch, and state that 100% in any one stock is dominated by a frontier portfolio Northwest of it.
The generic frontier portfolio holds every stock
State that a typical efficient portfolio puts nonzero weight on all available stocks, record that two-stock frontier points are rare exceptions, and contrast this with Buffett-style concentrated picking.
Adding a security never hurts
Write the weight-zero argument that an extra security cannot make the investor worse off, and draw the old and new efficient frontiers with the upper branch shifting Northwest.
Two sources of correlation between stocks
Record the common business cycle ('a rising tide lifts all boats') and the panic-driven flight to safety of autumn 2008, naming the safe assets money moved into.