Search
Search for an ETF or holding
Search for an ETF or holding
Updated 2mo ago.
Updated 2mo ago.
Systematic risk (also called market risk) is the risk that affects the entire market and cannot be eliminated through diversification. It includes recessions, interest rate hikes, geopolitical crises, and inflation.
When the Bank of Canada raises its policy interest rate, nearly all stocks and bonds are affected — even a perfectly diversified portfolio like VBAL.TO (Vanguard Balanced) or XBAL.TO (iShares Core Balanced). This is systematic risk: no matter how many ETFs you hold, you cannot escape it.
Diversification protects against specific risk (a single company going bankrupt), but not against systematic risk. That's why even a well-diversified portfolio can lose value during a crisis. An ETF's beta measures precisely its sensitivity to this market risk.