To diversify, an engineer working in an electric power-generating plant should invest in:
A) stocks of wind power-generating companies.
B) stocks of his own company.
C) a mutual fund that consists of only electric power-generating companies.
D) nothing.

Question

Quizplus · Accepted Answer

Investing in the stocks of wind power-generating companies would provide diversification from the engineer's own company, which has the potential to reduce risk. Additionally, as the emphasis on renewable energy sources increases, wind power-generating companies are likely to experience growth. Investing in a mutual fund that consists only of electric power-generating companies would not provide enough diversification as the engineer is still putting all their investments in the same industry. Not investing in anything is not recommended for diversification purposes.

To Diversify, an Engineer Working in an Electric Power-Generating Plant