Which of the following risks is most important to a well-diversified investor in common stocks?
A) Market risk
B) Unique risk
C) Idiosyncratic risk
D) Diversifiable risk

Question

Quizplus · Accepted Answer

Market risk, which is the risk that the overall stock market may fluctuate, is the most important risk to a well-diversified investor in common stocks. This risk cannot be diversified away because it affects the entire market, so it is important to be aware of and prepare for market fluctuations. Unique risk, idiosyncratic risk, and diversifiable risk can be mitigated through diversification.

Which of the Following Risks Is Most Important to a Well-Diversified