The underlying principles of portfolio theory include:
A)diversifying business-specific risk away.
B)basing decisions on stocks' risk/return characteristics in a portfolio context rather than on a stand-alone basis.
C)getting the highest available return for the amount of risk the investor is comfortable with.
D)All of the above

Question

Quizplus · Accepted Answer

All the given options are underlying principles of portfolio theory. Diversifying helps in reducing risk, considering risk/return characteristics on a portfolio level helps in maximizing returns, and choosing a risk level that the investor is comfortable with is essential for successful portfolio management.

The Underlying Principles of Portfolio Theory Include