The purpose of diversification is to
A)increase the liquidity of a financial portfolio.
B)reduce the brokerage fees involved in managing a financial portfolio.
C)reduce risk.
D)reduce tax liability.

Question

Quizplus · Accepted Answer

The purpose of diversification is to reduce risk by spreading investments across different asset classes, industries, and geographic regions. By doing so, an investor can minimize the impact of any one investment on the overall portfolio, and potentially enhance returns over the long-term. Diversification does not necessarily impact liquidity, brokerage fees, or tax liability.

The Purpose of Diversification Is to