The risk of a well-diversified portfolio depends on the market risk of the securities included in the portfolio.

Question

Quizplus · Accepted Answer

A well-diversified portfolio spreads the risk across different securities, reducing the impact of individual security risk. However, the overall risk of the portfolio is still influenced by the market risk of the securities included, which can affect the entire market or economy. Therefore, a well-diversified portfolio may still be subject to market risk.

The Risk of a Well-Diversified Portfolio Depends on the Market