QAEconomics › Buying several different investment alternatives to spread the risk helps an investor achieve:
Q

Buying several different investment alternatives to spread the risk helps an investor achieve:

A.lower rates of return.

B.lower commission fees.

C.isolation.

D.diversification.

A

Answer: D. Diversification.

In risk management in investments, the process of buying several different investment alternatives and portfolios to help spread the risk is known as diversification.

In other words, diversification is a strategy that investors use to minimize risk by including a good number of different types of investments. This strategy is applied when investors want to minimize their exposure to any risk associated with one huge investment deal.

A simpler way of explaining this would be that investors hate to put all their eggs in the same basket, for fear that they can be easily compromised by one problem or risk factor. In addition, the diversification of investments and assets has been known as a means of providing higher and longer-lasting yields.

3 years ago
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