ShmoopTube

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finance a la shmoop what are systemic and unsystematic risk systemic risks are

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just endemic to the market want to invest in the stock market and compound [Plate of vegetable appear]

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return your way into great wealth great but then you'll suffer the normal risk

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of the system that risk specifically is this yeah best of times worst of times

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but up over time the market goes up you just have to embrace the notion that [Man hugging a tree]

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there is systemic risk in that in the short run you can buy an S&P 500 index

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fund here then lose like a third or whatever of your money in not too many

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years but if you don't panic and sell just at the wrong time here right out

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the storm and keep going well then you should be just fine by the time you

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arrive here so that's risk that is always in the system equities rise and [Equity in the ocean]

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fall like the tides or something like that but generally they rise and if you

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want to swim in this bathtub well you get used to the turbulence and have an [Girl swimming against the tide]

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airsick bag handy all right that systemic risk or systemic risk

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what's unsystematic risk well it's bad investors or rather bad investing it's

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panicking and selling your stock just when you should be doubling down its

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buying lousy companies thinking that they're cheap today but not realizing [Woman runs away from smelly girl]

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that they will always be cheap because they're lousy or in a lousy industry or

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run by lousy management it's buying into lousy industries that also look cheap

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but are dying hello paper and pulp is yeah anyone really think that's gonna be [Paper printing]

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around in 20 years all right well it's believing the dreamy hopes and prayers

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of future earnings and trusting that there really will be 5 million [Traffic on the highway]

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driverless cars on the road in 3 years you know good luck with that we'd love

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it to be true but ain't gonna be unsystematic risk is also investing in

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bonds for the long-term taking very little risk when taking little risk is

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the opposite of what you should be doing when you're a young investor so yeah

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systematic and unsystematic risk both exist plentifully and both can bite you [Dog bites portfolio from woman]

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right in the portfolio so you got to know what both are and embrace them

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for what they're worth

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