BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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by diversifying your investments
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by making only medium-risk investments
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by putting all your money in savings accounts
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Detailed explanation-1: -Diversification is a technique that reduces risk by allocating investments across various financial instruments, industries, and other categories. It aims to minimize losses by investing in different areas that would each react differently to the same event.
Detailed explanation-2: -Diversifying your portfolio. Diversification has many advantages, the key one being reduced risk while retaining the possibility of higher potential returns. By increasing your exposure to diversified investments, you will be essentially spreading your risk.
Detailed explanation-3: -The risk in a portfolio of a diverse range of stocks will be less than the risk of holding just one single stock as long as the stocks are not truly correlated. This is because if one stock falls in value this should be offset by another lowly correlated stock in the portfolio rising in value.