The purpose of diversification or asset allocation is to spread your assets among several different types of investments to decrease risk.

Question

Quizplus · Accepted Answer

Diversification or asset allocation helps to reduce the overall risk of an investment portfolio by spreading it across different types of assets, such as stocks, bonds, and real estate. This is because when one asset performs poorly, other assets may perform better, thus balancing out the overall returns of the portfolio. Therefore, the purpose of diversification or asset allocation is to decrease risk.

The Purpose of Diversification or Asset Allocation Is to Spread