Which of the following is probably the best approach to diversification in portfolio management?

Question

Quizplus · Accepted Answer

Related diversification involves investing in industries and businesses that are related or have some synergy with each other, while still allowing for some level of diversification. This approach can help increase returns while minimizing risk, as there is still some level of familiarity and expertise in the chosen industries and businesses. Unrelated diversification and differentiation can be riskier as they involve investing in completely unrelated industries or businesses that may not have any synergy or familiarity. Related differentiation is not a commonly used term in portfolio management.

Which of the Following Is Probably the Best Approach to Diversification