The correct answer is C. Decreasing Risk.
Diversification is the process of spreading your investment across different asset classes, sectors, and countries. This helps to reduce your overall risk by minimizing the impact of any one investment on your portfolio.
For example, if you invest all of your money in stocks, and the stock market crashes, you could lose a lot of money. However, if you diversify your portfolio by investing in stocks, bonds, and real estate, you are less likely to lose all of your money if one of these asset classes crashes.
There are a few different ways to diversify your portfolio. One way is to invest in different asset classes, such as stocks, bonds, and real estate. Another way is to invest in different sectors of the economy, such as technology, healthcare, and financial services. You can also diversify your portfolio by investing in different countries.
Diversification is an important part of investing. By spreading your investment across different asset classes, sectors, and countries, you can reduce your overall risk and improve your chances of achieving your investment goals.
Here is a brief explanation of each option:
- Increasing Return: This is not the basic objective of diversification. Diversification does not guarantee that you will make more money. In fact, it can sometimes lead to lower returns if the investments you choose do not perform well.
- Maximising Return: This is also not the basic objective of diversification. Diversification is not about trying to make as much money as possible. It is about reducing risk.
- Decreasing Risk: This is the basic objective of diversification. Diversification helps to reduce your overall risk by minimizing the impact of any one investment on your portfolio.
- Maximizing Risk: This is not the basic objective of diversification. Diversification is not about trying to take on more risk. It is about reducing risk.