Final answer:
The statement is false as avoidance is not always the ideal strategy for high-risk situations; a mix of risk management strategies is typically more effective. Historical instances like the 2008 financial crisis show the importance of effective risk management in investment portfolios.
Step-by-step explanation:
The statement that avoidance is the ideal strategy when dealing with a risk that is high in both frequency and severity of losses is false. Avoiding high-risk situations might be a viable strategy in certain cases, but the complexity of risk management requires considering all options, including mitigation, transfer, acceptance or reduction in addition to avoidance. It's important to weigh the costs and benefits of each strategy. When a risk is both high in frequency and severity, avoidance may be impractical or impossible. Instead, a mix of strategies like mitigation through creating robust plans (Plan B), or transferring the risk by purchasing insurance, might be more appropriate.
Historically, a high risk level has proven to be detrimental to an investment portfolio at various times, such as during the 2008 financial crisis, when many investments plummeted in value due to high-risk exposure without adequate management or protection. This underscores the importance of a diversified portfolio and a well-thought-out risk management strategy to protect against significant losses.