Which of the following is a correct statement about diversification?
A) Most diversification benefits are realized with just 10 stocks.
B) Diversification is the process of reducing the riskiness associated with individual assets by spreading an investment across numerous assets.
C) Diversifiable risk is the only risk that matters to a rational investor.
D) When a stock is combined into a portfolio, the standard deviation of that portfolio remains unchanged.
E) There is no limit to the amount of risk that can be eliminated through diversification.

Question

Quizplus · Accepted Answer

Diversification is indeed the strategy of spreading investments across various assets to reduce the risk associated with individual investments. This approach can mitigate the impact of any single investment's poor performance on the overall portfolio.

Which of the Following Is a Correct Statement About Diversification