The object of diversification is:
A) to reduce risk and fluctuations in income.
B) to reduce risk, but not to reduce fluctuations in income.
C) to reduce fluctuations in income, but not to reduce risk.
D) neither to reduce risk, nor to reduce fluctuations in income.

Question

Quizplus · Accepted Answer

The object of diversification is to reduce risk and fluctuations in income by investing in a variety of assets that are not correlated with each other. By spreading investments across different asset classes, sectors, and geographic regions, investors can reduce the impact of any one investment or market event on their overall portfolio. This can help to smooth out fluctuations in income and minimize the potential for large losses.

The Object of Diversification Is