ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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T-bills
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Bonds
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Mutual funds
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Stocks
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Detailed explanation-1: -Systematic risk, also known as market risk, cannot be reduced by diversification within the stock market. Sources of systematic risk include: inflation, interest rates, war, recessions, currency changes, market crashes and downturns plus recessions.
Detailed explanation-2: -Let’s look at a diversification example: If A owned 500 stocks of different companies, he/she has reduced the risk, but at this stage, the portfolio may not have many high-performing stocks. There may come a day where A will end up in a no-profit-no-loss situation.
Detailed explanation-3: -Examples of low-risk investing include buying treasury securities, corporate bonds, money market mutual funds, fixed annuities, preferred stocks, common stocks that pay dividends and index funds.
Detailed explanation-4: -Shell plc (NYSE:SHEL) Costco Wholesale Corporation (NASDAQ:COST) PepsiCo, Inc. (NASDAQ:PEP) Walmart Inc. (NYSE:WMT) AbbVie Inc. (NYSE:ABBV) The Home Depot, Inc. (NYSE:HD) 24-Oct-2022