What does the term "due diligence" entail in the context of investments?

The term "due diligence" in the context of investments refers to the thorough investigation and analysis that an investor conducts before making an investment decision. It involves evaluating various factors such as the financial health of a company, understanding market conditions, assessing risks, and determining the suitability of the investment with respect to the investor's financial goals and risk tolerance.

Option B is correct because it encapsulates the essence of due diligence, which is to conduct a detailed investigation. This process may include reviewing financial statements, understanding the business model, examining industry trends, and considering regulatory and legal aspects that could impact the investment's viability. The purpose of due diligence is to ensure that investors make informed decisions, thereby minimizing potential risks associated with the investment.

In contrast, the other options do not adequately represent the concept of due diligence. Investing without research contradicts the fundamental principles of informed investing. Merely considering past performance overlooks the necessity of a comprehensive view of a company's prospects and current market conditions. Delegating research to financial advisors, while sometimes valuable, does not fulfill the investor's responsibility to perform their own due diligence, as ultimately, investors need to understand the investments they are making and how they fit their financial strategy.