False. Diversification cannot reduce the risk of a portfolio because the prices of different securities do not move exactly together.
A diversified portfolio is a collection of various investments that work together to lower the overall risk profile of the investor. Owning stocks from a variety of various sectors, nations, and risk profiles as well as other investments like bonds, commodities, and real estate are examples of diversification.
Although it can help you control risk by distributing your investment funds among several asset classes and types of securities, diversification cannot completely remove risk or ensure a profit. The chance of losing money still exists.
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