Also called idiosyncratic risk, specific risk
Non-systematic risk
Risk specific to one company or industry. It can be diversified away, so the market does not pay you for carrying it.
Updated 2026-09-05
Non-systematic risk is specific to one company or one industry: a failed drug trial, a factory fire, an accounting fraud, a regulator. It is real and it is survivable, because it can be diversified away.
The consequence is uncomfortable and important: the market does not compensate you for carrying it. Since it can be removed for free by holding more names, no premium is paid for choosing not to. A concentrated portfolio takes this risk and is paid nothing extra for it, which is only rational if you genuinely have an edge on the specific companies.
See also
- Systematic risk — Risk affecting the whole market at once. It cannot be diversified away, which is precisely why investors are paid a premium for bearing it.
- Diversification — Holding enough uncorrelated positions that no single one can ruin you. It removes company-specific risk and cannot touch market risk.
- Beta — How much the stock moves relative to the S&P 500. A beta of 1.0 moves with the market, higher is more volatile, and higher volatility raises the discount rate.
Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.
