SIE Exam Question 171: Answer and Explanation

Question: 171

Which of the following scenarios is the best example of diversification?

• A. An investor buys 1,000 shares of ABC stock at $25 per share
• B. An investor who invests $25,000 in one corporate bond
• C. An investor who invests $25,000 in a large cap growth mutual fund
• D. An investor who invests a total of $25,000 between stocks, bonds, and mutual funds.

Correct Answer: D

Explanation:

An investor who invests a total of $25,000 between stocks, bonds, and mutual funds is the best example of diversification.