Question

Amelia decides to buy 10 shares each of 5 companies instead of investing in 50 shares of a big company. this is an attempt to: the answer is

Answer 1

Amelia is attempting to diversify her portfolio in order to spread her risk. By dispersing her investment money among 5 different companies rather than putting it all into one, she lessens the chance of losing all her money in the event a company fails or does badly in the stock market. She is heeding the common expression that advises, "Don't put all your chickens in one basket".

Answer 2

The fact that Amelia decides to buy 10 shares each of 5 companies instead of investing in 50 shares of a big company is example of an attempt to
eliminate firm-specific risk though diversification.The term diversification is technique used in management that includes mixing a wide variety of investments (in this case shares), while firm-specific risk is the risk that corresponds to risks that are very specific to a certain company.