n NISM Certifications
X NISM Series X
Medium

To benefit from diversification, what must be true about the investments?

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

    Long investment horizon

  2. Low correlation among assets

    Correct answer

  3. C

    Equal proportions in asset classes

  4. D

    Regular rebalancing

Why this is the answer

Diversification reduces risk when assets have low or negative correlation, minimizing simultaneous losses.

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