Diversification is an investment strategy to:
A) maximize the return in stock investment.
B) minimize the risk in personal finance.
C) outperform the average stock market return.
D) reduce the risk of a given investment portfolio.

Question

Quizplus · Accepted Answer

Diversification is a strategy that aims to reduce the risk of a given investment portfolio by spreading the investments across different asset classes, industries, and geographies. By doing so, the investor can avoid concentration risk, which is the risk of losing all the money invested in a single asset or sector. While diversification may not necessarily maximize returns or outperform the market, it can help investors achieve a balance between risk and reward.

Diversification Is an Investment Strategy To