One of the easiest methods of diversifying away firm-specific risks is to:
A)buy stocks with a Beta of 1.0.
B)build a portfolio with 20-25 individual stocks.
C)purchase the shares of a mutual fund.
D)purchase stocks that plot above the security market line.

Question

Quizplus · Accepted Answer

Purchasing shares of a mutual fund allows an investor to diversify their portfolio easily, as mutual funds typically hold a wide variety of stocks, reducing firm-specific risks.

One of the Easiest Methods of Diversifying Away Firm-Specific Risks