The fund manager always invests in more than one asset class (equities, debts, money market instruments etc.) to spread the risks. It is called ______.

diversification

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liquidity

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expert management

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all of the above

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Solution

The correct option is A diversification
The fund manager always invests in more than one asset class (equities, debts, money market instruments etc.) to spread the risks. It is called diversification. In terms of finance, diversification can be defined as a process of allocating capital in such a way that the exposure to any particular asset gets reduced. It helps to reduce risk and volatility by investing in variety of assets.

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