The only relevant risk for investors that hold diversified portfolios of securities is undiversifiable risk.

Question

Quizplus · Accepted Answer

Undiversifiable risk, also known as systematic or market risk, affects the entire market and cannot be eliminated through diversification. Diversified portfolios are designed to mitigate diversifiable risk (specific to individual securities), leaving undiversifiable risk as the primary concern.

The Only Relevant Risk for Investors That Hold Diversified Portfolios