n NISM Certifications
XXI NISM Series XXI-A
Medium

The primary advantage of 'Diversification' in investment is to:

Practice question from NISM XXI A for PMS - Mock Test 3 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Increase overall risk to maximize returns

  2. Reduce risk by spreading investments across various assets

    Correct answer

  3. C

    Concentrate investments in one asset class for higher gains

  4. D

    Avoid taxes on investment gains

Why this is the answer

Diversification helps mitigate unsystematic risk by investing in a variety of assets.

Test yourself for real

Take a full NISM Series XXI-A mock test.

Same duration, same weighting, same difficulty distribution as the real exam — with explanations on every question.