Which of the following will tend to result in the least variation in the expected real rate of return from the ownership of stocks?
A) ownership of a single stock for a short period of time
B) ownership of a single stock over a lengthy period of time
C) ownership of stocks from a specific sector (for example, the automobile industry) over a lengthy period of time
D) ownership of a diverse set of stocks (the Standard & Poor's 500, for example) over a lengthy period of time

Question

Quizplus · Accepted Answer

Diversification across a broad set of stocks over a lengthy period reduces risk and variation in returns due to the spread of investment across different sectors and companies, which can offset individual stock volatility.

Which of the Following Will Tend to Result in the Least