Question

Someone who diversifies investments is more likely to increase both risks and returns. offset their losses with gains. reduce both risks and returns. increase liquidity of investments.

Answer 1

Offset their losses with gains

Step-by-step explanation:

Answer 2

Answer: Offset their losses with gains

Step-by-step explanation:

Diversification reduces the risk of losses because it spreads investment out across different industries that are ideally negatively correlated so that if things in one industry go wrong for instance, things will go right in the other.

For instance, the investor could invest in both Ice cream companies and Hot Beverage companies with the idea being that in winter when the Ice Cream company losses sales, the Hot Beverage company would make up for it and vice versa in the summer.

Diversification therefore works by offsetting losses in one investment with gains in another.