A diversified securities portfolio is characterized by
A)dissimilar risk and return characteristics of the securities.
B)concentrating on a single industry.
C)minimal loss potential.
D)stable earnings.
E)formula timing.

Question

Quizplus · Accepted Answer

A diversified securities portfolio means that the investments are spread out across different securities, industries, and asset classes in order to reduce risk. Therefore, the securities in the portfolio would have dissimilar risk and return characteristics as opposed to concentrating on a single industry. While minimal loss potential, stable earnings, and formula timing may be desirable features in a portfolio, they do not necessarily characterize a diversified portfolio.

A Diversified Securities Portfolio Is Characterized by