Your risk management approach should align with your risk tolerance and investment objectives. For instance:
• Risk-Averse Investors: Focus on bonds, index funds, or ETFs to minimize exposure to both systematic and unsystematic risks.
• Risk-Tolerant Investors: Opt for growth stocks or sector-specific investments, while maintaining a core diversified portfolio.
In the world of stock trading, understanding and managing risks is essential to safeguarding your investments and achieving long-term success. Systematic risk, though unavoidable, can be mitigated through strategic asset allocation and hedging. Unsystematic risk, on the other hand, can be effectively reduced through diversification and informed decision-making