Which combination of assets is likely to be most effective in reducing portfolio risk?
A)Two stocks in the same industry,such as GM and Ford
B)Two stocks in the same country,such as GM and IBM
C)Two precious metals,such as gold and silver
D)One precious metal and one stock,such as gold and GM

Question

Quizplus · Accepted Answer

Diversification across different asset classes, such as combining a precious metal like gold with a stock like GM, can reduce portfolio risk more effectively than combining assets within the same class or sector. This is because different asset classes often react differently to market conditions, reducing the overall volatility of the portfolio.

Which Combination of Assets Is Likely to Be Most Effective