It is possible to eliminate certain risk by investing in different companies. What type of risk is this?

Sagot :

The given statement can be marked as true. Unsystematic risk can be eliminated by investing in different companies.

What is meant by Unsystematic risk?

Unsystematic risk refers to risks that represents the portion of investment risk that can be practically reduced or eliminated through the way of diversification.

Diversification is the risk management strategy that consists a wide variety of investments. It ensures that if some assets perform poorly, other areas of the portfolio associated with different sectors can cover the loss.

Unsystematic risks can be reduced by diversifying one's investments.

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