Separate marketwide risk from company, liquidity, and inflation risks so portfolio decisions match the actual threat.
Not all stock-investing risk comes from the same source. Some risks come from broad market conditions that affect nearly every stock at the same time. Others come from a specific issuer, the trading conditions around a position, or the changing purchasing power of money.
This section separates four risk types that investors often blur together: market risk, company-specific risk, liquidity risk, and inflation risk. Keeping those categories separate matters because each risk requires a different response. A portfolio problem cannot be managed correctly if the investor diagnoses it incorrectly first.
In exam terms, the key distinction is usually whether the risk is broad and unavoidable within the stock market or whether it can be reduced through research, diversification, position sizing, or better execution choices.