One feasible way to hedge labor income is to ________.

Question

Quizplus · Accepted Answer

By diversifying your investment portfolio away from the industry in which you work, you reduce your exposure to economic shocks that may affect your industry and therefore your labor income. This way, you can rely on returns from investments in other sectors to buffer against potential income volatility in your current job. Saving for retirement only from investment income (B) may not be feasible for most people, as labor income is often the primary source of income for many individuals. Changing careers every 7 years (C) may not be a realistic option for everyone, and it also comes with its own set of risks and uncertainties. Investing heavily in the stock options provided by your firm (D) is not a prudent way to hedge labor income as it exposes you to company-specific risks and lacks diversification.

One Feasible Way to Hedge Labor Income Is to ________