Final answer:
Market movements explain 23% of U.S. Steel's returns, and diversifiable risk is the portion of total risk that can be reduced by diversification. This includes investing in assets such as mutual funds and index funds to ensure a well-balanced portfolio.
Step-by-step explanation:
The student is inquiring about the role market movements play in the returns of U.S. Steel and how much of the risk is diversifiable. To answer the question directly, it seems that 23% of U.S. Steel's returns are explained by market movements, meaning that the remaining returns are due to firm-specific actions or other non-market factors. When considering diversification, it is crucial because it reduces unsystematic risk, which is the risk specific to an individual stock or industry.
Diversification is important because it can protect an investor from significant losses if one or a few of their investments perform poorly. This is facilitated through investments like mutual funds and index funds, which consist of a mix of various assets, thereby spreading out risk.
Investors can purchase stocks through stock exchanges, and it's recommended to consider factors such as diversification to balance potential risks and rewards. Buying a house is also a financial investment that can contribute to one's wealth accumulation over time. However, forecasting stock prices is challenging due to market volatility and economic variations. Not all investments, including housing, are entirely safe, as they can be affected by market conditions.