Diversifiable risk
InvestingDefinition
Risk that can be eliminated through portfolio diversification. Single-stock risk is fully diversifiable across 30+ stocks; sector risk diversifies across sectors; country risk diversifies across geographies.
Investors aren't paid for taking diversifiable risk (no risk premium attached). Concentrated portfolios bear diversifiable risk for free — generally a bad trade.
Investors aren't paid for taking diversifiable risk (no risk premium attached). Concentrated portfolios bear diversifiable risk for free — generally a bad trade.