What is the primary role of diversification in building a mutual fund portfolio? Option: "To guarantee a fixed return on investment", "To solely invest in socially responsible funds", "To eliminate the need for financial advisors", "To spread risk across various assets, sectors, and geographies"

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What is the primary role of diversification in building a mutual fund portfolio?

"To guarantee a fixed return on investment"

"To solely invest in socially responsible funds"

"To eliminate the need for financial advisors"

"To spread risk across various assets, sectors, and geographies"

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Why is portfolio diversification important in mutual fund investing?

"To eliminate investment risk"

"To spread risk across different assets"

"To guarantee high returns"

"To maximize short-term profits"

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What is the primary reason investors diversify their investments across multiple mutual funds?

"To avoid paying taxes on investment gains"

"To mitigate risk and enhance potential returns"

"To solely support socially responsible companies"

"To guarantee a fixed return on investment"

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Why is diversifying investments important?

"To avoid the need for an emergency fund"

"To spread risk across different asset classes"

"To maximize returns in a single financial instrument"

"To guarantee a profit in all investments"

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What is the primary reason investors diversify their portfolios?

To reduce the risk associated with holding only one type of asset

To maximize short-term gains

To guarantee profits

To eliminate all investment risk

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What is the primary reason for diversifying investments across different sectors and asset classes?

To maximize returns by concentrating investments in high-growth sectors

To guarantee a steady and predictable return on investments

To eliminate the possibility of losses in the stock market

To reduce the overall risk exposure of the investment portfolio