A portfolio manager wants to increase or maintain client returns while mitigating risk. What decision should this portfolio manager make to achieve this goal?

While investing in the U.S. may seem appealing due to perceived stability, it does not inherently mitigate risk across a diversified portfolio. Concentrating investments in one geographic area can increase exposure to regional downturns, which could negatively impact overall returns if the market underperforms.

Investing in positively correlated stocks may lead to increased risk rather than risk mitigation. If these stocks decline, the portfolio manager may face simultaneous losses, undermining the goal of maintaining stable returns. Diversification is key to reducing risk, and similar stocks do not provide that.

Focusing solely on high-growth industries can expose the portfolio to higher volatility and increased risk. Growth stocks can be more unpredictable, and while they may offer the potential for higher returns, they do not guarantee stability and can lead to significant losses if the market fluctuates.