Elena is excited to invest, but she is worried that she might lose her investment funds by making risky investments. How could Elena use diversification to manage her risk?(1 point) Responses Elena could purchase multiple assets from multiple sources. Elena could purchase multiple assets from multiple sources. Elena could invest all of her funds into a single low-risk investment. Elena could invest all of her funds into a single low-risk investment. Elena could forego investing altogether. Elena could forego investing altogether. Elena could invest some of her funds into a single low-risk investment and pocket the rest as cash. Elena could invest some of her funds into a single low-risk investment and pocket the rest as cash.
Elena could purchase multiple assets from multiple sources. This means spreading her investment funds across different types of investments, such as stocks, bonds, real estate, and commodities. By diversifying her portfolio, Elena reduces the risk of losing all her funds if one investment performs poorly. If one investment underperforms, other investments may potentially offset the losses, leading to a more balanced overall return.
Elena could purchase multiple assets from multiple sources. By investing her funds in a diverse range of assets, she can spread out her risk. This means that even if one investment performs poorly, others may perform well, helping to mitigate potential losses. Diversification allows Elena to balance her portfolio and reduce the impact of any single investment on her overall funds.
To manage the risk of losing her investment funds, Elena can use diversification. Diversification involves spreading investments across different assets or sources to reduce exposure to any single investment. By doing so, Elena can minimize the potential impact of losses from a specific investment and increase the likelihood of positive returns.
One way for Elena to use diversification is by purchasing multiple assets from multiple sources. For example, she can invest in stocks from different industries, purchase bonds issued by different companies or governments, or allocate her funds across different mutual funds or exchange-traded funds (ETFs). This way, if one investment performs poorly, the others may still generate positive returns.
On the other hand, if Elena were to invest all of her funds into a single low-risk investment, she wouldn't be effectively diversifying her portfolio. While low-risk investments are generally safer, they still carry some level of risk. By spreading her investments across various assets and sources, Elena can further mitigate risk and potentially achieve more balanced returns.
Foregoing investing altogether would not be a sound option for Elena if she wants to grow her wealth. Investing allows individuals to participate in the potential growth of various financial markets and assets over time. However, it is important to note that investing always carries some level of risk, and diversification is one way to manage and minimize this risk.
Lastly, investing some of her funds into a single low-risk investment and pocketing the rest as cash may not provide sufficient diversification. While having some cash on hand for emergencies or short-term needs is important, relying solely on a single low-risk investment may limit the potential for higher returns from other investments. It is generally recommended to diversify across a range of assets to balance risk and potential rewards.
In conclusion, Elena can manage her risk by using diversification. This involves purchasing multiple assets from multiple sources to spread her investments and minimize the impact of losses from any single investment.