Finance glossary
Systematic Risk
Definition
Market-wide risk that cannot be diversified away.
Systematic risk affects the entire market, stemming from factors like recessions, interest rates, and geopolitics. Because it hits all assets to some degree, diversification cannot eliminate it. It is the risk investors are compensated for through the risk premium.
In a sentence
No amount of diversification could shield the portfolio from the systematic risk of a market-wide crash.
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