Which one of the following provides the greatest reduction in total risk?
A)diversification
B)asset allocation
C)security selection
D)beta reduction

Question

Quizplus · Accepted Answer

Asset allocation provides the greatest reduction in total risk because it involves diversifying investments across different asset classes (such as stocks, bonds, and real estate), which each have their own risk and return profiles. This helps to reduce the overall risk of the portfolio by spreading investments across different types of assets. Diversification (option A) is also important, but does not provide as much risk reduction as asset allocation. Security selection (option C) and beta reduction (option D) are more focused on managing specific risks within investments rather than reducing overall portfolio risk.

Which One of the Following Provides the Greatest Reduction in Total