Answer:
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One scenario that may prompt an investor to "play it safe" in investing due to the law of diminishing returns is when they have already achieved a high level of returns and the growth rate of their investment starts to slow down significantly. This could be a signal that the investment has reached a point where the additional benefits or returns from allocating more resources to it may be diminishing. In such cases, the investor may choose to take a more conservative approach to protect their gains and avoid potential losses. This could involve reducing exposure to higher-risk investments, diversifying their portfolio, or gradually shifting towards more stable and conservative investment options. By recognizing when the law of diminishing returns is at play, an investor can make informed decisions to safeguard their investments and financial well-being.