ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Unsystematic risk can be mitigated through diversification, and so is also known as diversifiable risk.

Detailed explanation-2: -Diversification is a risk management strategy that mixes a wide variety of investments within a portfolio. A diversified portfolio contains a mix of distinct asset types and investment vehicles in an attempt at limiting exposure to any single asset or risk.

Detailed explanation-3: -A financial risk is a form of risk that arises from an event and has an adverse impact on a person’s financial condition. In this life, nothing is without risk, especially when we talk about finances. There are many things that can just happen and threaten our financial stability.

Detailed explanation-4: -Financial risk diversification is one of the basic principles that should be taken into account when investing our money. According to this idea, owning different types of financial assets mitigates the risk of investing in only one type.

Detailed explanation-5: -Diversification lowers your portfolio’s risk because different asset classes do well at different times. If one business or sector fails or performs badly, you won’t lose all your money. Having a variety of investments with different risks will balance out the overall risk of a portfolio.