The existence of transaction costs indicates that at some point the additional cost of diversification relative to its benefit would be excessive for most investors.

Question

Quizplus · Accepted Answer

Transaction costs refer to the fees and expenses associated with buying and selling securities. These costs can increase with increased diversification, eventually exceeding the potential benefits of diversification. Therefore, the statement is true that at some point, the additional cost of diversification relative to its benefit would be excessive for most investors.

The Existence of Transaction Costs Indicates That at Some Point