Over the long term, a portfolio consisting of an S&P 500 index and an EAFE index will generally produce ________ returns and have ________ risk than a portfolio comprised solely of the S&P 500 index.
A) higher; more
B) higher; less
C) lower; more
D) lower; less

Question

Quizplus · Accepted Answer

Adding an EAFE index to a portfolio diversifies the holdings, reducing the overall risk of the portfolio. The EAFE index also represents international stocks, which offers exposure to different markets and potentially higher returns. Therefore, a portfolio consisting of the S&P 500 index and an EAFE index will generally produce higher returns and have less risk than a portfolio comprised solely of the S&P 500 index.

Over the Long Term, a Portfolio Consisting of an S&P