Diversification of assets among several types of investments can increase risk.

Question

Quizplus · Accepted Answer

Diversification is a risk management strategy that spreads investments across various asset classes, reducing the overall risk of the portfolio. By diversifying, the losses from one asset class are balanced out by gains from another, resulting in smoother and more stable returns. Therefore, diversification typically reduces risk and does not increase it.

Diversification of Assets Among Several Types of Investments Can Increase