Investors in the equity market primarily face systematic risk (also known as market risk) and unsystematic risk (specific company or idiosyncratic risk). Systematic risk stems from broad macroeconomic factors—such as inflation, interest rate hikes, geopolitical conflicts, or recessions—that affect the entire financial market and cannot be mitigated through portfolio diversification. Unsystematic risk relates to events impacting a specific business or industry sector, such as poor corporate management, regulatory crackdowns, or product recalls, which can be minimized by diversifying investments across multiple asset classes.