When all stocks move in the same direction,diversification among stocks works just as well as ever.

Question

Quizplus · Accepted Answer

Diversification works by spreading investments across different types of assets to reduce the overall risk of a portfolio. When all stocks move in the same direction (e.g. during a market crash), diversification among stocks is not effective because all stocks are likely to decline together. To continue to reduce risk during times of market volatility, it is important to diversify across different asset classes, such as stocks, bonds, and commodities.

When All Stocks Move in the Same Direction,diversification Among Stocks