n NISM Certifications
XXI NISM Series XXI-A
Medium

The primary purpose of 'Diversification' is to:

Practice question from NISM XXI A for PMS - Mock Test 5 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Maximize returns

  2. Minimize risk by spreading investments across various assets

    Correct answer

  3. C

    Focus investments in a single sector

  4. D

    Eliminate all risks from the portfolio

Why this is the answer

Diversification reduces unsystematic risk by holding a variety of assets.

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