Question

Why should you diversify your investment portfolio?

A. It guarantees returns on your portfolio in the near future.
B .It ensures that your portfolio’s losses turn into profits.
C .It reduces the overall risk of your portfolio.
D. It increases the risk and the potential returns of your portfolio.

correct answer is C.

Answer 1

The reason for diversification of one's investment portfolio is: C .It reduces the overall risk of your portfolio.

What Does Diversification of  Investment Portfolio Mean?

Diversification of investment portfolio as an investment strategy simply involves spreading your investment around several types of asset, which is a way of reducing the volatility of your investment over time, which helps to reduce overall risk.

Thus, the main reason you would want to diversify your investment portfolio is: C .It reduces the overall risk of your portfolio.

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