Category: General Knowledge | Last updated: 2026-09-18

What is the primary purpose of portfolio diversification in investing?

A) To guarantee higher returns
B) To minimize investment fees
C) To spread risk across different assets
D) To simplify tax reporting

Explanation

Diversification is an investment strategy that mixes a wide variety of investments within a portfolio. The goal is to minimize risk by investing in a variety of assets, so that a poor performance by one asset is offset by a good performance by another, rather than guaranteeing higher returns.

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