What type of portfolio aims to diversify the risks associated with a concentrated investment?

• A. Investment portfolio
• B. Completion portfolio
• C. Diversified portfolio
• D. Comprehensive portfolio

Answer: (B)

A completion portfolio is specifically designed to mitigate the risks associated with a concentrated investment by adding a diverse mix of assets to the overall investment strategy. This type of portfolio generally holds assets that counterbalance or complement the concentrated positions, thereby achieving a more balanced risk profile.

For example, if an investor has a significant position in one stock or sector, a completion portfolio may include various stocks from different sectors, bonds, or alternative investments. By doing so, it reduces the overall risk that comes from over-concentration in one area while still allowing the investor to maintain their original investment thesis. As a result, the completion portfolio serves as a strategic tool for enhancing diversification and managing risk effectively.