A Diversified Portfolio

Systemic risk is also known as market risk, and can’t be reduced through diversification in a portfolio. An example of market risk would be the United States putting a major tariff on a country like China. This would cause almost every stock to go down, so diversification will not help in this case.

Unsystematic risk can be reduced through diversification. A diverse portfolio will usually contain 30 stocks. When an investor obtains at least 30 stocks, with the same dollar amount invested in each stock; non-market risk is eliminated. In this scenario, even if one company goes bankrupt, the entire portfolio will not be lost. Just remember, do not put all your eggs in one basket.

You may also want to consider investing in corporate bonds or treasury securities as a further way to diversify a portfolio.