Which of the following investment portfolios is not an example of proper diversification?

The selected answer reflects a lack of proper diversification because it consists entirely of shares from automobile manufacturers. Having investments concentrated in a single sector—automotive in this case—exposes the portfolio to sector-specific risks. For example, if the automotive industry faces challenges due to a downturn in consumer demand or a shift toward electric vehicles, all investments in that sector could suffer simultaneously, leading to higher volatility and increased risk.

In contrast, the other options exemplify more diversified portfolios. They include investments across various sectors or asset types, which helps to mitigate risk. For instance, holding bonds from different municipalities and stocks from various industries allows for reduced exposure to any single market or economic event. This balance is critical in investment strategies aimed at achieving long-term financial goals while managing potential risks effectively.