Diversifiable Risk
Updated on July 18, 2023
Diversifiable risk, also known as unsystematic risk, refers to the portion of investment risk that can be reduced or eliminated by diversifying or spreading investments across different assets or sectors. In simple terms, it means that by investing in a variety of different things, you can lower the risk associated with any one specific investment. By diversifying your portfolio, you can reduce the impact of individual events or factors that may affect a single investment, and potentially minimize losses.
How to manage diversifiable risk?
The ways to manage diversifiable risk are mentioned below.
Diversify your investments by spreading them across different asset classes and sectors.
Invest in mutual funds or ETFs to gain exposure to a diversified portfolio.
Allocate investments across different regions to reduce the impact of local events.
Consider different investment strategies to diversify risk.
Regularly review and rebalance your portfolio to maintain desired asset allocation.
Stay informed and diversify your knowledge about investment options.
Seek professional advice from a financial advisor to assess your risk tolerance and guide your investment decisions.
