Single-stock risk
InvestingDefinition
The portion of a stock's volatility unique to that company (firm-specific risk), as opposed to market or factor risk. Diversifiable away by holding 20-30 stocks across sectors.
Even with diversification, small mid-cap portfolios retain meaningful single-stock exposure. Index funds (S&P 500, total market) push single-stock risk close to zero — the cost is full market exposure.
Even with diversification, small mid-cap portfolios retain meaningful single-stock exposure. Index funds (S&P 500, total market) push single-stock risk close to zero — the cost is full market exposure.