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Essay / Investment Case Study - 712
Systematic risks can generally be avoided through technical conduct. Currently, most investors will place their investment in a different portfolio because it can spread risk in different places. Some profits can offset losses that occur elsewhere, so the majority of people are willing to avoid putting all their money into a certain asset. On the other hand, some managers of a large company may make mistakes in operating their business. Therefore, these errors will lead to very poor financial performance in the market. In order to avoid this situation, investors will invest different assets as there is little chance of getting into situations where all investments are lost due to poor decisions made by companies. In addition to this, there are several other systematic risks, common in the market. First of all, the interest rate will cause the systematic risks since the interest rate directly affects the final profits on returns. Meanwhile, inflation rates are another factor that can be called systematic risks, because the inflation rate will influence the final money received by investors and the value of investment returns will be less than the initial value . Finally, there are investors' expectations regarding the overall performance of the economy. Because if investors think that the future development of the economy has no positive anticipation, they will decrease the current investment, thus the total investment income will be