n NISM Certifications
NSM General NISM
Medium

Why is diversification important for business owners?

Practice question from Advanced B1 S6 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    It guarantees profits

  2. B

    It removes all market risks

  3. It protects wealth from risks linked to one profession or business

    Correct answer

  4. D

    It avoids all taxation

Why this is the answer

Keeping all wealth tied to one business increases concentration risk, while diversification helps preserve long-term financial stability.

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