What Does Systematic Risk Mean?
The risk inherent to the entire market or entire market segment.

Also known as "un-diversifiable risk" or "market risk."

Interest rates, recession and wars all represent sources of systematic risk because they affect the entire market and cannot be avoided through diversification. Whereas this type of risk affects a broad range of securities, unsystematic risk affects a very specific group of securities or an individual security. Systematic risk can be mitigated only by being hedged.

Even a portfolio of well-diversified assets cannot escape all risk.



Alex said...

This is true, so one should always being betting the majority of his/her holdings on long term goals that way you can mitigate the systematic risk as much as possible.

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