If two portfolios are formed, one with only one stock and another with 20 stocks, the portfolio with more stocks will always be the less risky.

Question

Quizplus · Accepted Answer

The number of stocks in a portfolio does not always determine its level of risk. One stock can carry a higher level of risk due to its specific characteristics, while a portfolio of 20 stocks can still be risky if they are all highly correlated and exposed to the same market forces. Diversification across different industries, sectors, and asset classes is important in reducing overall portfolio risk, rather than simply holding a large number of stocks.

If Two Portfolios Are Formed, One with Only One Stock