An investor who reduces random risk by investing in a variety of types of investments is using
A)the buy-and-hold approach.
B)dollar-cost averaging.
C)rules and charts.
D)portfolio diversification.

Question

Quizplus · Accepted Answer

Portfolio diversification is a strategy in which an investor invests in different types of assets (e.g. stocks, bonds, real estate, commodities) to reduce the risk of losing money in any one investment. By spreading investments across multiple asset types, the investor is able to reduce random risk as market conditions change over time. The other options (buy-and-hold, dollar-cost averaging, and rules and charts) do not directly address the issue of random risk reduction through diversification.

An Investor Who Reduces Random Risk by Investing in a Variety