Diversification reduces the risk of a portfolio because ________ and some of the risks are averaged out of the portfolio.
A)stocks do not move identically
B)stocks have common risks
C)stocks are unpredictable
D)stocks are always affected by the market
E)some stocks have lower returns than others

Question

Quizplus · Accepted Answer

Diversification reduces the risk of a portfolio because stocks do not move identically, meaning that different stocks have different returns and risks. By investing in multiple stocks, some of the risks are averaged out of the portfolio, reducing overall risk.

Diversification Reduces the Risk of a Portfolio Because ________ and Some