Holding many risky assets and thus reducing the overall risk an investor faces is called
A)diversification.
B)foolishness.
C)risk acceptance.
D)capitalization.

Question

Quizplus · Accepted Answer

Diversification is a strategy of investing in a variety of assets that are not perfectly correlated with each other, in order to reduce the overall risk faced by an investor. By holding many risky assets, an investor can achieve diversification and thus reduce their exposure to any single asset's risk. B (foolishness) and C (risk acceptance) do not accurately describe this strategy, and D (capitalization) is not relevant to this concept.

Holding Many Risky Assets and Thus Reducing the Overall Risk