One of the easiest methods of diversifying away firm-specific risks is to:
A) buy only stocks with a beta of 1.0.
B) build a portfolio with 40 to 55 individual stocks.
C) purchase the shares of a mutual fund.
D)purchase stocks that plot above the security market line.

Question

Quizplus · Accepted Answer

Purchasing shares of a mutual fund is one of the easiest methods for diversifying away firm-specific risks because mutual funds invest in a wide range of securities, spreading out the risk.

One of the Easiest Methods of Diversifying Away Firm-Specific Risks