Why should an investor consider diversification and asset allocation?
A) To offset capital gains
B) To achieve desired risk-return balance
C) To increase total returns
D) To achieve higher dividend yields
E) To improve price-appreciation values

Question

Quizplus · Accepted Answer

Diversification and asset allocation are effective strategies for managing risk and achieving a desired risk-return balance in an investor's portfolio. By diversifying across different asset classes and investments, the investor can reduce the impact of market volatility in any one particular investment or sector. This can lead to more consistent returns over time and can help to avoid significant losses if any one investment performs poorly. Additionally, asset allocation can help the investor to identify how much of their portfolio should be invested in different asset classes, such as stocks, bonds, and cash, based on their individual goals, risk tolerance, and time horizon. This can help to ensure that their portfolio is appropriately balanced and aligned with their investment objectives.

Why Should an Investor Consider Diversification and Asset Allocation