Company unique risk can be virtually eliminated with a portfolio consisting of approximately 20 securities.

Question

Quizplus · Accepted Answer

Diversification can significantly reduce the unsystematic (company-specific) risk associated with individual securities. By holding a diversified portfolio of around 20 different securities from various sectors, the unique risk tied to any single company can be virtually eliminated, leaving only the market (systematic) risk.

Company Unique Risk Can Be Virtually Eliminated with a Portfolio