ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Increases the risk/return ratio
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Limits investors’ choices to inly one or two investment tools
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Indicates an investor is a good predictor of the return an investment will have
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Decreases risk by investing money in a variety of investment tools
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Detailed explanation-1: -Diversification is a strategy that mixes a wide variety of investments within a portfolio in an attempt to reduce portfolio risk. Diversification is most often done by investing in different asset classes such as stocks, bonds, real estate, or cryptocurrency.
Detailed explanation-2: -Diversification has several benefits for you as an investor, but one of the largest is that it can actually improve your potential returns and stabilize your results. By owning multiple assets that perform differently, you reduce the overall risk of your portfolio, so that no single investment can hurt you too much.
Detailed explanation-3: -It is one way to balance risk and reward in your investment portfolio by diversifying your assets. Diversification is the practice of spreading your investments around so that your exposure to any one type of asset is limited. This practice is designed to help reduce the volatility of your portfolio over time.
Detailed explanation-4: -Diversification lets you reduce the risk of your portfolio without sacrificing potential returns. As you diversify by adding more and different investments to a portfolio, you lower your potential risk of loss. A fully diversified portfolio has the least possible risk for a given expected return.
Detailed explanation-5: -Diversification is a technique that reduces risk by allocating investments across various financial instruments, industries, and other categories.