Multiple choice

Fund A invests in shares of companies in India. Fund B invests in shares of companies in India and USA, we can say that

  1. definitely A is more diversified than B

  2. definitely A and B are well diversified

  3. we need more information to identify which of them is better diversified

  4. definitely B is more diversified than A
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Fund B is more diversified because it invests in companies across two countries (India and USA) versus Fund A which only invests in India. Geographic diversification across countries typically provides better risk reduction than concentration in a single country, even if the number of securities were similar. We don't need more information because we can clearly see B has broader geographic exposure.

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