Diversification will
A) not reduce a portfolio's total risk.
B) reduce a portfolio's unique risk.
C) increase a portfolio's total risk.
D) not reduce a portfolio's unsystematic risk.

Question

Quizplus · Accepted Answer

Diversification can reduce a portfolio's unique risk or unsystematic risk by spreading out investments across different assets or asset classes. This means that the risk associated with a particular company or industry is not concentrated in one single security but spread out among multiple securities. However, diversification may not eliminate systematic risk, which is the risk associated with the overall market or economy. Therefore, diversification can help reduce total risk to some extent, but not completely.

Diversification Will