Investors with long horizons, such as the goal to have a million dollars by the time they retire in 20 or 30 years, can afford to assume a higher level of risk, since there is a greater chance that, over time, the investment will pay off. But, lets get more specific. Market risk is the degree to which a security's behavior is related to the overall behavior of the stock or bond markets. If an equity mutual fund, for example, behaves in a fashion similar to the overall stock market, it is said to have a high degree of market risk. If the market declines, there is a strong likelihood that the fund's value will decline as well.
Unique risk pertains only to a particular security.
It is independent of changes in the stock market. For a bond, credit risk is unique risk, since a bond's credit rating is solely a function of the issuer's financial condition. In assessing the level of risk that is acceptable, investors must consider their investment portfolio in its entirety and understand that the risk of certain types of investments can be reduced, even significantly, through diversification. The most commonly used measure of market risk is beta. Beta is defined as a statistical measure of a security's volatility relative to the broader market.