Why is too much diversification considered a negative thing when dealing in a mutual funds?

a.

Higher diversification means that the mutual fund costs a lot more and doesn't provide as much profit.

b.

When there is too much diversification in a mutual fund, great success in a single stock doesn't make much of a difference in the overall progress of the fund.

c.

If there are too many different investments, it would be too hard to keep track of them and some would inevitably get lost in the system.

d.

Greater diversification means a drastic increase in taxes, so most companies avoid overly diversifying the mutual fund.

Answer:

b. When there is too much diversification in a mutual fund, great success in a single stock doesn't make much of a difference in the overall progress of the fund.

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Alec

23 May, 20:47

Why is too much diversification considered a negative thing when dealing in a mutual funds?

a.

Higher diversification means that the mutual fund costs a lot more and doesn't provide as much profit.

b.

When there is too much diversification in a mutual fund, great success in a single stock doesn't make much of a difference in the overall progress of the fund.

c.

If there are too many different investments, it would be too hard to keep track of them and some would inevitably get lost in the system.

d.

Greater diversification means a drastic increase in taxes, so most companies avoid overly diversifying the mutual fund.

Answer:

b. When there is too much diversification in a mutual fund, great success in a single stock doesn't make much of a difference in the overall progress of the fund.

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Donavan · Answer 1

The correct answer is B) when there is too much diversification in a mutual fund, great success in a single stock doesn't make much of a difference in the overall progress of the fund.

Too much diversification is considered a negative thing when dealing in mutual funds because when there is too much diversification in a mutual fund, great success in a single stock doesn't make much of a difference in the overall progress of the fund.

When an investor decides to participate in a mutual fund investment, he knows that its money is going to go to a pool of money collected from a group of other investors. These mutual funds need to be operated by people with experience in securities such as stocks, bonds, and other instruments. But the investor has to be cautious in not to diversify its portfolio when investing in a mutual fund. Too much diversification is considered a negative thing when dealing in mutual funds because when there is too much diversification in a mutual fund, great success in a single stock doesn't make much of a difference in the overall progress of the fund.

Jovany Pena · Answer 2

When there is too much diversification in a mutual fund, great success in a single stock doesn't make much of a difference in the overall progress of the fund.