ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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reduces risk to investors
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increases investors’ access to their money
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offsets the effects of inflation on investments
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guarantees a fixed rate of return on an investment
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Detailed explanation-1: -Diversification means lowering your risk by spreading money across and within different asset classes, such as stocks, bonds and cash. It’s one of the best ways to weather market ups and downs and maintain the potential for growth.
Detailed explanation-2: -Diversification helps mitigate the risk to you about such scenarios by choosing different investments and types of investments. Diversification doesn’t guarantee investment returns or eliminate risk of loss including in a declining market.
Detailed explanation-3: -Diversification involves spreading your investment dollars among different types of assets to help temper market volatility. By “smoothing out” market performance, you may be more likely to maintain a long-term portfolio position, potentially improving your chances of meeting key investment goals.
Detailed explanation-4: -While diversification can reduce risk, it can’t eliminate all risk. Diversification reduces asset-specific risk – that is, the risk of owning too much of one stock (such as Amazon) or stocks in general, relative to other investments.
Detailed explanation-5: -Diversification reduces risks, smooths out returns and helps improve long-term portfolio performance.