Diversification involves:
A) investing all your money in one company.
B) buying only one kind of stock.
C) buying only low-risk bonds.
D) None of these statements is true.

Question

Quizplus · Accepted Answer

Diversification involves spreading out your investments across multiple companies, industries, and asset classes to reduce risk and potentially increase returns. Investing all your money in one company or buying only one kind of stock goes against the principle of diversification and increases your risk of losing money if that company or sector experiences a setback. Similarly, buying only low-risk bonds may not provide the growth potential necessary to meet your long-term financial goals.

Diversification Involves