Which type of risk can an investor effectively manage by investing in broadly diversified mutual funds?
A)Serial risk
B)Systematic risk
C)Unsystematic risk
D)None of the above is correct.

Question

Quizplus · Accepted Answer

Broadly diversified mutual funds can help an investor manage unsystematic risk, which is the risk that comes from investing in a single company or a small number of companies. By investing in a diverse portfolio of assets, the impact of any negative news or events affecting one company can be mitigated by the positive performance of other companies in the fund. However, it cannot effectively manage systematic risk, which is the risk that affects the entire market or a particular sector, and cannot be diversified away.

Which Type of Risk Can an Investor Effectively Manage by Investing