11-2) Which of the following statements is most correct concerning diversificati

Question

11-2) Which of the following statements is most correct concerning diversification and risk?
a. Risk-averse investors often select portfolios that include only companies from the same industry group because the familiarity reduces the risk.
b. Risk-averse investors often choose companies from different industries for their port¬folios because the correlation of returns is less than if all the companies came from the same industry.
c. Only wealthy investors can diversify their portfolios because a portfolio must contain at least 50 stocks to gain the benefits of diversification.
d. Proper diversification generally results in the elimination of risk.

Explanation / Answer

) Which of the following statements is most correct concerning diversification and risk?
a. Risk-averse investors often select portfolios that include only companies from the same industry group because the familiarity reduces the risk.
b. Risk-averse investors often choose companies from different industries for their port¬folios because the correlation of returns is less than if all the companies came from the same industry.
c. Only wealthy investors can diversify their portfolios because a portfolio must contain at least 50 stocks to gain the benefits of diversification.
d. Proper diversification generally results in the elimin

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