Final answer:
To reduce investment risk, one should invest in a diversified portfolio of investments. Doing so spreads risk across different asset classes and minimizes the impact of any single investment's poor performance.
Step-by-step explanation:
To reduce investment risk, the best option among those provided is to invest in B) a portfolio of investments. This approach is known as diversification, which involves spreading your investments across various asset classes such as bonds, stocks, and potentially real estate, rather than concentrating all your money in a single investment. Diversification mitigates the risk because it's unlikely all sectors or investments will underperform simultaneously, thereby smoothing out the performance of your investment portfolio.
Investing in a corporate bond may provide income and can be relatively low risk compared to stocks, provided the company is financially sound. However, bonds still carry the risk of default which can lead to a loss of invested capital. Investing solely in corporate stocks can offer high returns but comes with the highest level of risk due to market volatility. Similarly, real estate investment can also be profitable but is susceptible to market fluctuations and requires significant capital and management.
Therefore, a diversified portfolio could include a mix of stocks, bonds, mutual funds, and possibly other investments like real estate, each contributing to risk reduction and potential return in different ways.