If an Investor Buys Enough Stocks, He or She Can

question 19

True/False

If an investor buys enough stocks, he or she can, through diversification, eliminate all of the market risk inherent in owning stocks, but as a general rule it will not be possible to eliminate all diversifiable risk.

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Definitions:

Nonprogrammed Decisions

Decisions made in response to unique, novel, or ill-structured situations that require creativity and judgment, as opposed to routine or standard procedures.

Routine Decisions

Decisions that are made frequently and with a relatively simple process because they involve situations that have occurred before and have predictable outcomes.

Established Procedure

A set method or protocol that has been officially adopted for conducting activities or accomplishing tasks.

Rational Model

A decision-making model that involves a structured and logical process to arrive at a decision.