Stock Market · True or False
Is it true that diversification reduces company risk but not systemic crashes?
True. Market-wide events affect all assets.
Diversification removes company-specific risk but not market-wide risk — during systemic events like 2008, nearly all asset classes dropped together.
Believing a diversified portfolio is immune to crashes, then being shocked when a broad market decline hits every holding simultaneously.
This scenario is one of 155 in the Skillful Stock Market track. Each card states a situation, you decide true or false, and the explanation follows immediately.
- Answer
- True
- Track
- Stock Market
- Topics
- diversification, systemic-risk
Also asked as
Does diversification protect against systemic market crashes? Can a diversified portfolio still crash? Why diversification does not eliminate all risk?
The scenario in full
Diversification reduces company risk but not systemic crashes.
Frequently asked questions
Is it true that diversification reduces company risk but not systemic crashes?
True. Market-wide events affect all assets.
Does diversification protect against systemic market crashes?
True. Market-wide events affect all assets. Diversification removes company-specific risk but not market-wide risk — during systemic events like 2008, nearly all asset classes dropped together.
Can a diversified portfolio still crash?
True. Market-wide events affect all assets. Diversification removes company-specific risk but not market-wide risk — during systemic events like 2008, nearly all asset classes dropped together.
Why diversification does not eliminate all risk?
True. Market-wide events affect all assets. Diversification removes company-specific risk but not market-wide risk — during systemic events like 2008, nearly all asset classes dropped together.
Where does this stock market question come from?
It is one of 155 scenarios in the Skillful Stock Market track. Each card states a realistic situation, you decide true or false, and the explanation follows immediately.
How do I practise more questions like this?
Start the Stock Market quiz. It runs about two minutes per session, the first 150 questions are free across every category, and your progress saves automatically.