Diversification:
A) reduces risk but also reduces expected returns.
B) increases risk but also increases your expected returns.
C) reduces risk but does not reduce your expected returns.
D) reduces risk and increases your expected returns.

Question

Quizplus · Accepted Answer

Diversification reduces risk by spreading investments across various assets, but it does not necessarily reduce expected returns, as it aims to achieve a more stable return profile without sacrificing potential gains.