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

Question

BlackTom AI · Accepted Answer

In this question, the claim is about holding a portfolio of 30 selected stocks and whether that eliminates all risk for an investor.
Option 1: 'True' — This would assert that a 30-stock portfolio can completely eliminate risk. However, investing risk is composed of two main parts: systematic (market-wide) risk and unsystematic (idiosyncratic) risk. Diversification across 30 stocks can significantly reduce unsystematic risk by spreading company-specific factors, but it cannot remove systematic risk that affects nearly all equities (such as economic downturns, interest rate changes, or geopolitical shocks). Therefore, this statement is inaccurate because it overstates the impact of diversification and ignores persistent market risk.
Option 2: 'False' — This option acknowledges that risk is not completely eliminated by diversification across 30 stocks. By selecting a broad, well-diversified set of stocks, an investor can lower unsystematic risk, but systematic risk remains and cannot be diversified away entirely. Other risk factors, such as liquidity risk, credit risk, and sector concentration, can also influence overall risk, but none of these undermine the core point that complete elimination of risk through diversification alone is not achievable. Consequently, this statement aligns with the fundamental principles of portfolio theory and risk diversification.

COMM_V 298 101 102 103 2025W1 Class 15 Practice Quiz

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

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COMM_V 298 101 102 103 2025W1 Class 15 Practice Quiz

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

查看解析

登录即可查看完整答案

类似问题

You can best reduce investment risk by investing in

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………… could be eliminated by portfolio diversification.

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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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