Market Risk

What is Market Risk?

Market risk is the risk an investor accepts when holding any asset; the risk that changes in the market will cause the asset to fluctuate in value. This risk is completely unavoidable and cannot be reduced by diversification.

The beta of an asset indicates it's correlation with the market, so the only way to reduce exposure to market risk is to choose stocks with low betas, although this will in turn reduce any gains in a market boom.

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