Elena is excited to invest, but she is worried that she might lose her investment funds by making risky investments. How could Elena use diversification to manage her risk?(1 point)

Question

Responses

Elena could invest some of her funds into a single low-risk investment and pocket the rest as cash.
Elena could invest some of her funds into a single low-risk investment and pocket the rest as cash.

Elena could invest all of her funds into a single low-risk investment.
Elena could invest all of her funds into a single low-risk investment.

Elena could purchase multiple assets from multiple sources.
Elena could purchase multiple assets from multiple sources.

Elena could forego investing altogether.

Answer 1

Elena could purchase multiple assets from multiple sources.

This approach allows her to spread her investment across different asset classes and sectors, which can help reduce her overall risk. Diversification helps to mitigate the potential loss from any single investment by balancing it with gains from others.