Which of the following is a key component of a successful capital preservation strategy?

A key component of a successful capital preservation strategy is the maintenance of diversified investment holdings. Diversification reduces risk by spreading investments across various asset classes, sectors, and geographic regions. This strategy helps protect the overall portfolio from adverse movements in any single investment or market sector. By holding a variety of investments, the negative performance of one can potentially be offset by the positive performance of others, ultimately supporting the goal of preserving capital over time.

Frequent trading of portfolio assets, while it can generate short-term gains, often incurs higher transaction costs and may lead to missed long-term investment opportunities. Concentration on high-risk startups significantly increases the potential for loss, compromising capital preservation. Maximizing leverage in investments can amplify returns but also enhances risk, potentially leading to substantial losses. Thus, maintaining a diversified approach remains essential for achieving stability and minimizing risks within a capital preservation strategy.