Answer: The trader has reduced CAPITAL RISK.
Explanation: Capital risk can simply be said to be the unrealised ability to lose all or part of an investment. It usually occurs in investment in which the capital are not protected or at risk of being lost. Some examples of Capital risk investment are stocks, real estate, non-govermental bonds etc.
By investing in the exchange listed stock position, the trader stands at risk to lose all of their investment but in the exchange listed stock index fund, the risk is greatly reduced.