Stockholders manage risk by

Question

Quizplus · Accepted Answer

Diversifying their portfolios is the most effective way for stockholders to manage risk. By investing in a variety of different stocks, bonds, and other assets, they spread their risk and reduce the impact of any one investment's performance on their overall portfolio. Electing the board of directors and appointing day-to-day managers are important responsibilities of stockholders, but they do not directly manage risk. Having lots of bonds in their portfolios may reduce risk to some extent, but it is not as effective as diversification.

Stockholders Manage Risk by