Final answer:
Systemic or market risk impacts all shares and results from macroeconomic events; it cannot be eliminated through diversification, which mitigates company-specific risks.
Step-by-step explanation:
The risk that affects all shares to a greater or lesser extent and is due to large macroeconomic shocks is known as systemic risk or market risk. This type of risk cannot be eliminated through diversification. Diversification is a strategy recommended by financial advisors for mitigating the impact of idiosyncratic risks, which are risks unique to a single company or industry. However, systematic risks are influenced by widespread economic events such as natural disasters, wars, or massive unemployment, over which individuals have very little control. Globalization has interconnected financial markets, which means systemic risks can trigger a financial crisis affecting multiple nations. While diversification can help stabilize an investment portfolio by balancing the individual performances of a variety of stocks or bonds, it does not negate the effects of systemic risks that impact the entire market.