Definition of Unsystemic Risk

Financial Terms Beginning with U

What is Unsystemic Risk

Unsystematic risk is the risk which is unique to a specific company or industry. Exposure to unsystematic risk can potentially be reduced through diversification. Once diversified, an investor is still subject to market-wide systemic risk.

The total risk of investing is the combination of the unsystematic risk plus the systemic risk. Unsystematic risk is also known as diversifiable risk, non-systematic risk, specific risk or residual risk.

Glossary of Terms and Phrases

A financial dictionary or glossary is an essential tool to better understand the meaning of a specialized term or phrase. It would obviously make life much easier if everyone spoke the same language and used the same financial terms and phrases but that is not realistic.

We learn new languages to communicate with each other, transact business globally and to appreciate other cultures. Global finance is a specialized language that if understood and mastered, it will provide benefits that help to decrease risk and improve investment returns. Financial literacy is the foundation of developing good investment strategies and sound decision making.

Related Investment Terms

Inflation Risk

Market Risk

Reinvestment Risk

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