If your portfolio currently consists of common stock in three companies, you could increase your diversification by all of the following, except
A) selling one of the companies and putting the money in a bond.
B) selling one of the companies and putting the money in a REIT.
C) buying another stock.
D) selling one of the companies and putting the money in the other two.

Question

Quizplus · Accepted Answer

Diversification is about spreading investments across different types of assets to reduce risk. Options A and B involve moving funds into different asset classes (bonds and real estate, respectively), which increases diversification. Option C involves adding another company's stock, which also increases diversification within the stock asset class. Option D, however, concentrates the investment further into the existing assets (the other two companies' stocks), which does not increase diversification.

If Your Portfolio Currently Consists of Common Stock in Three