The process of eliminating systematic risk through the purchase of a number of assets is called:
A) Portfolio reduction.
B) The systematic risk principle.
C) The beta principle.
D) The risk-reward slope.
E) Portfolio diversiﬁcation.

Question

Quizplus · Accepted Answer

Portfolio diversification is the process of eliminating systematic risk through the purchase of a number of assets. By diversifying the portfolio, the risk is spread out among different types of assets, which reduces the overall risk of the portfolio. This is achieved by investing in assets with different levels of risk and return, thereby reducing the impact of any individual asset on the overall performance of the portfolio.

The Process of Eliminating Systematic Risk Through the Purchase of a Number