n NISM Certifications
XXI NISM Series XXI-A
Medium

What is the main objective of diversification in portfolio management?

Practice question from NISM XXI A for PMS - Mock Test 2 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    To eliminate all risks

  2. To reduce unsystematic risk

    Correct answer

  3. C

    To maximize returns regardless of risk

  4. D

    To invest solely in government securities

Why this is the answer

Diversification aims to minimize company-specific risk, not total risk.

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