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Chapter 6. Understanding and Managing Risk > Systematic Investment Risk

Systematic Investment Risk

Systematic investment risk represents risks that are… predictable. Unsystematic investment risks are those that are out of our direct control, such as events like 9/11 or Hurricane Hugo. These unsystematic risks will impact our investments, but there isn't anything we can do from an investment standpoint to avoid them. Systematic investment risk represents known risks that, while we have little control over them, we can reduce or eliminate. The following sections discuss the systematic investment risks that you should be familiar with.

Market Risk

Sometimes known as volatility, market risk is typically the first risk that people try to quantify. Market risk is what leads us to the taking Pepto Bismol on days when the market is down and giving high fives when the market is up. Volatility is movement up or down during a given period of time. The more the stock or bond moves in shorter periods of time, the greater the volatility.


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