Question

An investor stock per folio has had significant loss as if the investor has a high tolerance for risk which action would they take?

1) Sell all the stocks immediately
2) Hold onto the stocks and wait for the market to recover
3) Buy more stocks to average down the cost
4) Diversify the portfolio by investing in different sectors

Answer 1

An investor with a high tolerance for risk should diversify the portfolio by investing in different sectors.

Step-by-step explanation:

When faced with significant losses in their stock portfolio, an investor with a high tolerance for risk should diversify the portfolio by investing in different sectors. Diversification involves spreading investments across different sectors to reduce the impact of any single stock's performance on the overall portfolio. This strategy helps mitigate risk by balancing out potential losses with potential gains from other investments.