Eliminating Risk: The Art of Diversification
Crashes And Taxes Podcast · Rebecca Walser
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Show Notes
All equity investments come with two types of risk. There's the risk of the stock itself, and the greater market conditions.
Every single stock has a specific risk and economic fundamentals that affect its prospects. This type of risk can be mitigated through stock diversification, employing an investing strategy of accumulating non-correlated stocks and positions.
Systemic market risk isn't the same. The market is not something that we can tame or control.
We have no way to diversify away from the risk of the market, but if you work with a financial advisor, there are ways to control it.
What are some of the specific risks attached to individual stocks? How can we reduce the downsides of being in the market?
In this episode, I share an important investing lesson to start off the year, mitigating risk, and the role of diversification.