The investor carefully studied the quarterly reports before deciding to diverse his holdings across real estate, bonds and emerging markets.

In the following sentence, four words have been highlighted which may be misspelt or inappropriate in their usage. Mark the erroneous word as the answer and if all the words are correct in their spellings and usage, choose ‘All are correct’ as the correct answer.

The correct answer is diverse.

Step-by-step Explanation:

1. Analyze the Sentence Context and Structure:
The given sentence is:
"The investor carefully studied the quarterly reports before deciding to diverse his holdings across real estate, bonds and emerging markets."

2. Identify the Grammatical Function Required:
In the clause "before deciding to diverse his holdings", the structure requires an infinitive verb following the word "to" (i.e., "to + [verb in base form]").

3. Examine the Highlighted Word 'diverse':
The word diverse is an adjective meaning "showing a great deal of variety" or "very different". It is not a verb.
The correct verb form meaning "to make diverse or give variety to" is diversify.

4. Check the Other Highlighted Words:
• carefully: An adverb correctly modifying the verb "studied". Spelled correctly.
• quarterly: An adjective correctly modifying the noun "reports". Spelled correctly.
• emerging: A present participle/adjective modifying "markets". Spelled correctly.

5. Conclusion:
The word diverse is used inappropriately in place of the verb diversify. Therefore, diverse is the erroneous word.