What is the purpose of diversification?

Question

Quizplus · Accepted Answer

The purpose of diversification is to lower the overall risk of your portfolio by spreading your investments across different asset classes, industries, and geographic regions. This way, if one investment performs poorly, the others may help offset the losses. Diversification does not necessarily maximize possible returns, but it does help balance risk and potential reward. Increasing the risk of your portfolio goes against the purpose of diversification, so option B is incorrect. Option D is also incorrect as diversification is indeed a widely recognized financial strategy.

What Is the Purpose of Diversification