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    Question

    A company invests in different assets simultaneously in order to reduce risks. What is this strategy called?

    A Multiple investments Correct Answer Incorrect Answer
    B Diversification Correct Answer Incorrect Answer
    C Risk reduction Correct Answer Incorrect Answer
    D Shared partnership Correct Answer Incorrect Answer
    E Investment maximization Correct Answer Incorrect Answer

    Solution

    This strategy is called diversification. Diversification helps prevent the risk of investing into a single asset whose price can fluctuate and be unpredictable. By spreading out the investment into various assets, the risk from fluctuations of one single asset can be reduced.

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