CFA Practice Question

There are 294 practice questions for this study session.

CFA Practice Question

Which statement about portfolio diversification is correct?
A. The risk-reducing benefits of diversification do not occur meaningfully until at least 50-60 individual securities have been purchased.
B. Because diversification reduces a portfolio's total risk, it necessarily reduces the portfolio's expected return.
C. Typically, as more securities are added to a portfolio, total risk would be expected to decrease (at a decreasing rate).
Explanation: By constructing a portfolio with assets that do not move together, you create a portfolio that reduces the ups and downs in the short term but continues to grow steadily in the long term.

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