Kay Powers wants to diversify her portfolio by investing in a firm that has the potential to earn above average profits compared to other firms in the economy.What type of stock is Kay thinking about adding to her portfolio?

Question

Quizplus · Accepted Answer

Kay is looking for a stock that has the potential to earn above average profits, which is typically associated with growth stocks. Defensive stocks are usually less volatile and perform well during downturns, but they may not provide above average profits. Cyclical stocks perform well during economic expansions, but may not be consistently profitable. Small cap stocks are associated with smaller companies with potentially higher growth rates, but also carry higher risks. Blue chip stocks are known for their stability and strong financials, but may not have as much potential for above average profits as growth stocks.

Kay Powers Wants to Diversify Her Portfolio by Investing in a Firm