The primary purpose of portfolio diversification is to
A)increase returns and risks.
B)eliminate all risks.
C)eliminate asset-specific risk.
D)lower both returns and risks.
E)eliminate systematic risk.

Question

Quizplus · Accepted Answer

The primary purpose of portfolio diversification is to eliminate asset-specific risk by spreading the investment across multiple assets rather than relying on a single or few investments. This way, if one investment performs poorly, the overall portfolio is less affected. It does not necessarily eliminate all risks, lower returns, or eliminate systematic risk.

The Primary Purpose of Portfolio Diversification Is to