Which Statement About Portfolio Diversification Is Correct

question 28

Multiple Choice

Which statement about portfolio diversification is correct?

• A)Proper diversification can eliminate systematic risk.
• B)The risk-reducing benefits of diversification do not occur meaningfully until at least 50-60 individual securities have been purchased.
• C)Because diversification reduces a portfolio's total risk, it necessarily reduces the portfolio's expected return.
• D)Typically, as more securities are added to a portfolio, total risk would be expected to decrease at a decreasing rate.

---

Definitions:

High Performers

Refers to individuals or groups who consistently achieve outstanding results and surpass standard expectations in their work or responsibilities.

Creativity

The ability to generate new and original ideas, solutions, or products, often seen as essential for innovation and problem-solving.

Innovation

The process of taking a new idea and putting it into practice.

Base Compensation

The initial salary or wage that is paid to an employee, not including any additional benefits, bonuses, or overtime.