The Principle of Diversification Tells Us That

Multiple Choice

The principle of diversification tells us that:

A) concentrating an investment in two or three large stocks will eliminate all your risk.
B) concentrating an investment in three companies all within the same industry will greatly reduce your overall risk.
C) spreading an investment across five diverse companies will not lower your overall risk.
D) spreading an investment across many diverse assets will eliminate all the risk.
E) spreading an investment across many diverse assets will eliminate idiosyncratic risk.