Final answer:
Portfolio diversification allows for a spread of investments to reduce risk. An investment officer can choose stocks for liquidation based on market value, rate, and BETA.
Step-by-step explanation:
The purpose of portfolio diversification is to spread investments across different assets or types of investments to reduce risk. By investing in a variety of assets, such as stocks, bonds, and mutual funds, an investor can minimize the impact of any single investment's performance on their overall portfolio. This allows for high, medium, and low risk forms of investment as different assets carry varying levels of risk.
If liquidation needs to occur, an investment officer would have options as to which stocks to liquidate based on factors such as market value, rate, and BETA. These factors help determine the investment's current market worth, its potential return, and its sensitivity to market movements.