Which of the following leads to the diversification of risk?
A)Investing in assets that give the highest possible returns
B)Investing in safe assets that may give low returns
C)Investing in multiple assets rather than a single asset
D)Investing in assets that are highly risky but give high returns

Question

Quizplus · Accepted Answer

Investing in multiple assets rather than a single asset leads to the diversification of risk as it spreads out the investment risk across different assets. This reduces the overall risk and volatility of the portfolio. Investing in assets that give the highest possible returns or are highly risky but give high returns may increase the potential for higher returns, but it also increases the risk. Safe assets that may give low returns also have the potential for low risk but limit the potential for higher returns.

Which of the Following Leads to the Diversification of Risk