SIE practice questionhardRisk — Non-Systematic Risk Reduction
Which portfolio is MOST effectively diversified to reduce unsystematic risk?
- A20 stocks spread across technology, healthcare, financials, consumer staples, and utilities
- B50 different oil and gas stocks
- CTwo technology stocks and one cryptocurrency fund
- DOne index fund tracking the S&P 500✓ Correct answer
Explanation
Why D — One index fund tracking the S&P 500
An S&P 500 index fund provides broad exposure across hundreds of companies and many industries, making it the strongest choice for reducing unsystematic risk. Holding many securities in one industry, or only a few concentrated positions, leaves substantial company and sector-specific risk.
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