Help
Course Catalog > Funds > 300
Funds 301: Mutual Funds: Why Diversify?

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
Which statement is false?
Choose wisely. There is only one correct answer.
Diversification can ensure that you never lose money. You often get better short-term results as you are likely to own something that is doing well. Diversification lowers long-term volatility as different investments move in and out of favor. But diversification doesn't mean you'll never lose money.
2.
Which is the least important type of diversification?
Choose wisely. There is only one correct answer.
By subasset class. Diversifying by investment and asset class are most important. Diversifying by subasset class is secondary.
3.
In investing, diversifying means _______.
Choose wisely. There is only one correct answer.
All of the above. All of these answer choices describe diversification.
4.
When it comes to mutual funds, you should own _______.
Choose wisely. There is only one correct answer.
Maybe neither. There are no 'must-own' types of funds; assembling a portfolio of mutual funds is a matter of personal taste and personal goals. However, be aware of your options so that you can appropriately choose what you should and shouldn't own.
5.
What does diversifying by asset class usually mean?
Choose wisely. There is only one correct answer.
Owning a mix of stocks, bonds, and cash. Owning multiple companies is diversification by investment, while owning a mix of growth, value, and international stocks is generally seen as diversification by subasset class.