Final answer:
The correct option is A. Financial institutions help individuals diversify portfolio risks by offering a range of investment options that allow for spreading out risk across different assets, mirroring banks' own risk management strategies of lending diversification.
Step-by-step explanation:
Financial institutions help individual savers diversify their portfolio risks primarily by offering a variety of investment options. These institutions provide a platform for individuals to invest in different types of assets, such as stocks, bonds, mutual funds, and other financial instruments. By investing in a diversified portfolio, individuals are not overly exposed to the risks associated with any single investment.
Diversification allows for potential losses in one area to be offset by gains in other areas, thereby reducing the overall risk of the investment portfolio. This principle echoes the broader strategy used by banks themselves to maintain a positive net worth by lending to a broad mix of consumers and industries, which tends to balance out the loan defaults. It's important to note that while diversification can protect against market volatility, it doesn't provide insurance against investment losses nor promote excessive risk-taking.