Investors can make their investments in corporate stocks less risky by
A) purchasing shares of a mutual fund, which holds the stocks of many diverse corporations.
B) buying stocks and holding them each for only for short periods of time.
C) investing in firms that are in the same, rather than different, industries.
D) none of the above.

Question

Quizplus · Accepted Answer

By investing in a mutual fund, investors can spread their investments across a diverse portfolio of stocks from multiple corporations, reducing the overall risk of their investment. This is because if one stock performs poorly, it may be offset by the gains of others in the fund. Buying and selling stocks frequently (Option B) can increase risk due to transaction fees and potential losses from market fluctuations. Investing in firms in the same industry (Option C) can increase risk because they may be affected by similar market forces or events.

Investors Can Make Their Investments in Corporate Stocks Less Risky