Unsystematic risk

non-systematic risk

This type of risk include dramatic events such as a strike, plunging revenues ,Higher financing cost ,Declining profit margins ,a natural disaster such as a fire, or something as simple as Management misconduct or slumping sales. Two common sources of unsystematic risk are business risk and financial risk. However non-systematic risk can be diversified, So instead of investing all your money in one company, you can choose to diversify and invest in 3-4 different companies (ideally from different sectors). When you do so, unsystematic risk is drastically reduced.

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