Which of the Following Statements Is MOST Correct Concerning Diversification

question 129

Multiple Choice

Which of the following statements is MOST correct concerning diversification and risk?

• A) Risk-averse investors often choose companies from different industries for their portfolios because the correlation of returns is less than if all the companies came from the same industry.
• B) Risk-averse investors often select portfolios that include only companies from the same industry group because the familiarity reduces the risk.
• C) Only wealthy investors can diversify their portfolios because a portfolio must contain at least 50 stocks to gain the benefits of diversification.
• D) Proper diversification generally results in the elimination of risk.

---

Definitions:

Hiring A Person

The process of engaging an individual for employment or the provision of services under terms and conditions.

Double Compensation

The act of receiving two separate forms of payment or reimbursement for the same expense or loss.

Partner Competes

An act where a partner engages in a business activity that competes with the business of the partnership, potentially violating their fiduciary duty.

Competing Venture

A business or project undertaken by an entity that is in direct competition with another enterprise in the same market segment.