Which of the following portfolios is diversified across asset classes?

Diversification across asset classes means allocating capital among different broad categories of investments, such as equities, fixed income, cash equivalents, real estate, or alternatives. A portfolio containing both equity and fixed income securities is diversified across asset classes because common stocks and bonds have different risk-return profiles, income characteristics, volatility patterns, and sensitivity to economic conditions. Choice A is not diversified across asset classes because regional bank stocks are concentrated in one industry and one geographic region. Choice C is diversified by maturity within one asset class—municipal bonds—but it remains a fixed income portfolio. Choice D has exposure to different types of real estate properties, but REITs remain primarily a real estate equity sector exposure, not broad asset-class diversification. The SIE outline includes “Strategies for Mitigation of Risk,” specifically “Diversification,” and also identifies core product categories such as equity securities, debt instruments, REITs, and packaged products. The exam distinction is whether diversification is across sectors, maturities, issuers, or true asset classes. Only choice B clearly crosses asset classes. Reference: Section 2.1 Products; Section 2.2 Investment Risks, strategies for mitigation of risk.