Which one of the following is least apt to reduce the unsystematic risk of a portfolio?
A) Reducing the number of stocks held in a portfolio
B) Adding bonds to a stock portfolio
C) Adding international securities into a portfolio of U.S. stocks
D) Adding U.S. Treasury bills to a risky portfolio
E) Adding technology stocks to a portfolio of industrial stocks

Question

Quizplus · Accepted Answer

Reducing the number of stocks held in a portfolio may actually increase unsystematic risk as the portfolio is more concentrated in a few stocks. Therefore, A is least apt to reduce unsystematic risk. The other options can potentially reduce unsystematic risk by diversifying the portfolio across different asset classes or sectors.

Which One of the Following Is Least Apt to Reduce