A balanced portfolio can eliminate unsystematic risk

Question

Quizplus · Accepted Answer

A balanced portfolio consists of a mix of different types of investments, such as stocks, bonds, and cash, which can help to minimize the impact of unsystematic risk, or risk specific to individual assets. This is because losses in one asset class can be offset by gains in another, reducing the overall volatility of the portfolio. However, systematic risk, or risk inherent in the overall market, cannot be eliminated through diversification but can be managed through asset allocation and risk management strategies.

A Balanced Portfolio Can Eliminate Unsystematic Risk