Diversification has the advantage of
A) reducing expected return.
B) reducing actual return.
C) reducing risk.
D) reducing the profits of insurance companies.

Question

Quizplus · Accepted Answer

Diversification helps to reduce risk by investing in a variety of assets that are not perfectly correlated with each other. This means that if one investment performs poorly, the impact on the overall portfolio will be minimized. It does not necessarily reduce expected return, and it does not reduce the profits of insurance companies.

Diversification Has the Advantage of