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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.

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Don

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Solution By Steps

Step 1: Understanding Diversification

Diversification involves spreading investments across various financial instruments, sectors, or regions to reduce risk. It is based on the principle that different assets perform differently under various market conditions.

Step 2: Impact on Risks

By diversifying, an investor reduces the risk of significant losses from a single investment performing poorly, as the negative impact is spread across multiple investments.

Step 3: Impact on Returns

Diversification does not guarantee profits or protect completely against losses. However, it aims to smooth out unpredictable events in a specific industry or segment by spreading the risk.

Step 4: Impact on Liquidity

Diversification can increase the liquidity of investments as it involves holding a variety of assets, some of which may be more liquid than others.

Final Answer

Someone who diversifies investments is more likely to offset their losses with gains.

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