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Byline: Phuemphol Prasertlum
Aug. 2--FOR MUTUAL FUNDS, DIVERSIFICATION IS KEY: Risk management is a central aspect of modern finance, but the concept of risk is not well understood outside professional circles. One of the most important ideas behind modern portfolio management theory is the division between market risk, also known as systemic risk, and stand-alone, or unsystemic risk, of an individual stock or bond.
Market risk refers to risks inherent in investing in any risky asset such as inflation, corporate sector performance, business cycles and other macroeconomic variables.
Stand-alone risk is any negative impact specific to an ...