Final answer:
True, diversifying across several investments is recommended when constructing a portfolio to minimize risk and balance returns. By not putting all your investment into one company or asset, you reduce the chances of significant loss from any one investment's poor performance.
Step-by-step explanation:
True, when constructing a portfolio, it is advisable to diversify across several investments. Diversification means buying stocks or bonds from a wide range of companies, rather than investing all your money into a single company or asset class. This strategy follows the old adage, "Don't put all your eggs in one basket" and aims to minimize risk by spreading it across various investments.
While diversification can help iron out the ups and downs of investing, it should be noted that it does not guarantee economic success. However, it does reduce the risk of losing a significant amount of investment due to problems affecting a single company or industry. On a broader level, some investments may perform better than expected, while others may not do as well, but overall, the extremes tend to balance out.
Individuals can purchase stocks through stockbrokers or online trading platforms. Diversifying your portfolio is considered important because it can help you achieve more stable and less volatile investment returns over time.