Investing term

What is Single-stock risk?

The risk that one company you own goes to zero or close to it — independent of the broader market.

Single-stock risk is the danger that one company you own suffers a disaster — fraud, bankruptcy, a shattered business model — independent of the broader market. Unlike market risk, it can't be reasoned away; any individual company can go to zero. Diversification is the only real defense, which is why concentrating heavily in one stock (often an employer's) is so perilous.

For example

A single accounting scandal can take one stock to near zero overnight — a blow an index fund of 500 companies would barely register.

Single-stock risk is taught hands-on in Stage 17 — Portfolio-Level Risk.

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Related terms

60/40 portfolioThe classic balanced portfolio: 60% global equities, 40% investment-grade bonds.Asset mixThe split of the portfolio across asset classes — stocks, bonds, real estate, commodities, cash.Correlation trapThe phenomenon where assets that look uncorrelated in calm markets all crash together in a crisis.Headline noiseThe constant churn of financial news that moves prices intraday but is irrelevant to a multi-decade investor.
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