The variation in the rate of return one can expect from ownership of stocks will generally be smaller if
A) all of the funds are invested in a specific sector of the economy such as the automobile industry.
B) a diverse set of stocks is held over a lengthy period of time such as 30 or 40 years.
C) all of the funds are invested in a single stock.
D) the funds are invested for a relatively short period of time.

Question

Quizplus · Accepted Answer

Diversifying investments across a wide range of stocks and holding them for a long period reduces risk and variation in returns due to the benefits of diversification and the ability to weather market fluctuations over time.

The Variation in the Rate of Return One Can Expect