The correct answer is C. reduce risk.
When you increase the number of stocks in your portfolio, you are essentially diversifying your investment. This means that your portfolio is not as reliant on any one stock or sector, and is therefore less likely to be affected by changes in the market. This can help to reduce your overall risk and volatility.
However, it is important to note that diversification does not guarantee a profit. In fact, it is possible to lose money even with a diversified portfolio. This is because the stock market is inherently risky, and there is always the possibility that your investments will decline in value.
Overall, increasing the number of stocks in your portfolio can be a good way to reduce risk. However, it is important to remember that diversification does not guarantee a profit, and you should always do your own research before investing in any stocks.
Here is a brief explanation of each option:
- A. reduce return: This is not the correct answer because increasing the number of stocks in your portfolio can actually increase your return. This is because diversification can help to reduce your risk, which can lead to higher returns over time.
- B. reduce average: This is not the correct answer because increasing the number of stocks in your portfolio does not necessarily reduce the average return of your portfolio. In fact, it is possible that your average return could increase if you diversify your investments.
- C. reduce risk: This is the correct answer because increasing the number of stocks in your portfolio can help to reduce your risk. This is because diversification can help to spread your investment across different sectors and industries, which can protect you from losses in any one sector or industry.
- D. increase prices: This is not the correct answer because increasing the number of stocks in your portfolio does not necessarily increase the prices of your stocks. In fact, it is possible that the prices of your stocks could decline if you diversify your investments.