You can best reduce investment risk by investing in

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BlackTom AI · Accepted Answer

When considering how to best reduce investment risk, we should evaluate how each option spreads or concentrates risk across different assets.
Option 1: 'a portfolio of investments.' This approach typically reduces risk by diversification—holding a variety of assets that do not move in lockstep, which can smooth returns over time and mitigate the impact of any single investment's poor performance.
Option 2: 'a corporate bond.' While corporate bonds can provide regular income, they carry credit and interest-rate risks. If the issuing company experiences trouble or interest rates rise, the bond price can fall, so this choice focuses risk on a single issuer and asset class rather than spreading risk.
Option 3: 'real estate.' Real estate can offer potential for income and appreciation, but it also comes with liquidity risk, market-specific volatility, and sector concentration. Holding real estate alone exposes an investor to market and property-specific factors, rather than distributing risk across many assets.
Overall, diversification through a portfolio of investments generally lowers overall risk by reducing exposure to any single asset’s volatility, compared with concentrating holdings in one bond or one real estate investment. Diversification is a core principle for risk management in investing.

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You can best reduce investment risk by investing in

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BUSFIN 1200 AU2025 (2014) Final Exam- Requires Respondus LockDown Browser

You can best reduce investment risk by investing in

查看解析

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类似问题

Holding a portfolio of 30 selected stocks eliminates all risk for an investor.

Which of the following statements about risk is NOT true?

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Which one of the following terms best refers to the practice of investing in a variety of diverse assets as a means of reducing risk?

………… could be eliminated by portfolio diversification.

One of the advantages of investing in a managed investment fund is that the investors can:

Ms Brown is reviewing her investment portfolio of Australian shares with her advisor. Which of the following statements best explains why investors are typically not compensated for taking on unsystematic risk?

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