Which of the following individuals has a poor diversification strategy? Someone who buys:
A) stock in gun manufacturing, ammunitions, and rifle companies.
B) stock in textbook publishing, tea and coffee production, and the technology sector.
C) T-bills, corporate bonds, and technology stocks.
D) government bonds, technology stocks, and agricultural stocks.

Question

Quizplus · Accepted Answer

This individual has a poor diversification strategy because they have invested heavily in one specific industry (gun manufacturing, ammunitions, and rifle companies). If that industry experiences a downturn, their entire portfolio could suffer. It is important to have a mix of investments in different industries to minimize risk.

Answer: B, C, D
 These individuals have a good diversification strategy because they have investments in multiple industries and asset classes. This helps to spread out risk and minimize the impact of any one investment experiencing a downturn.

Which of the Following Individuals Has a Poor Diversification Strategy