Question

True or False. When we combine stocks in a? portfolio, the amount of risk that is eliminated depends on the degree to which the stocks face common risks and move together.

Answer 1

When we combine stocks in a? portfolio, the amount of risk that is eliminated depends on the degree to which the stocks face common risks and move together.

Ans: True

when you can combinedifferent investments that will minimize risk for the entire portfolio while getting maximum returns. This occurs because when you combine assets, you are diversifying your unsystematic risk, or the risk related to one specific stock.This concept simply means not putting all of your eggs in one basket, which helps mitigate risk and generally leads to better return on investment. Diversifying your hard-earned dollars does make sense, but there are different ways to diversify, and there are different portfolio types. It's important to understand that building any kind of portfolio will require research and some effort. Here is some basic information about five different portfolio types and how to get started with each.