Which of the following statements about diversification in an investment portfolio are correct?

Question

Answer

A well-diversified portfolio guarantees a positive return every year.

Answer

Diversification cannot eliminate market risk — if the whole market falls, a diversified portfolio still loses value.

Answer

Diversification works best when the assets in the portfolio do not all move up and down together.

Answer

Diversification reduces company-specific (idiosyncratic) risk by spreading investments across many assets.

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