n NISM Certifications
X NISM Series X
Medium

Sector-specific risk can be reduced through ______.

Practice question from NISM Series XA- Investment Adviser (Level 1) Mock Test 7 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Remaining invested in a popular sector

  2. Diversification across sectors

    Correct answer

  3. C

    Switching sectors frequently

  4. D

    Investing in large and mid-cap stocks within the same sector

Why this is the answer

Sector-specific risk arises from factors affecting a particular industry and can be reduced by diversifying investments across multiple sectors.

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