Editing Systematic risk (section)

===A simple example===

Consider an investor who purchases stock in many firms from most global industries. This investor is vulnerable to systematic risk but has diversified away the effects of idiosyncratic risks on his portfolio value; further reduction in risk would require him to acquire risk-free assets with lower returns (such as [[United States Treasury security|U.S. Treasury securities]]). On the other hand, an investor who invests all of his money in one industry whose returns are typically uncorrelated with broad market outcomes ([[beta (finance)|beta]] close to zero) has limited his exposure to systematic risk but, due to lack of diversification, is highly vulnerable to idiosyncratic risk.