n NISM Certifications
XXI NISM Series XXI-A
Medium

Which of these statements about 'Portfolio Diversification' is true?

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

Options

  1. It reduces unsystematic risk by investing across various assets

    Correct answer

  2. B

    It eliminates all types of investment risk

  3. C

    It involves investing only in one asset class

  4. D

    It guarantees higher returns

Why this is the answer

Diversification spreads investments across different assets to minimize unsystematic (specific) risks.

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