Portfolio risk is a chance that the combination of assets or units, within the investments that you own, fail to meet financial objectives. Each investment within a portfolio carries its own risk, with higher potential return typically meaning higher risk.
In theory, portfolio risk can be eliminated by successful diversification: holding combinations of investments that do not depend on the same circumstances to return a profit. In reality, though, it is more probable that risks will be minimised and not eliminated entirely.
Portfolio risk is just one of the risks that traders should be wary of. Most risks apply to individual investments, but it is also important to ensure that your portfolio as a whole doesn’t end up working against you.
