What are different types of investment risks?
There are many types of investment risks that include but are not limited to the risks of the sectors, business risk, liquidity, financial risk, tax risk and systemic risks such as political risk, market risk, interest risk and inflation risk. The investor usually needs to understand what is called a compromise with a return to risk, which means that compensation for the investment is a somewhat reasonable amount of risk. This means that investment with a low chance of failure is likely to bring low returns and higher investment risks could bring excellent revenues. Thus, risk tolerance is usually at the forefront of many investors before investing. The sector's investment risks include a chance of an event that could adversely affect businesses in the same economy sector at the same time. For example, a major credit crisis can cause Decline in many stocks of companies that provide financial services. Economic crisis, interest rates, political unrest and other factors can cause systematrisks. Generally systematic risks are not diversified risks. This means that even diversification does not have to help avoid these types of risks, so securing is a common way that investors seek to overcome systemic risks.
Investors basically use securing strategies in an effort to compensate for volatility using tools such as options or futures. For example, an investor who owns certain securities can have futures contracts for their sale at a specific price in the future. In this way, even if these securities lose significant market value, they will be able to sell at a specified price, which reduces the risk and mdash ;; Maybe it even cancels - and allows him to book profit.
Moreover, there is usually a political risk in countries that have an unstable political environment. Among other things, these countries can experience serious civil units that can hurt many investsThe tights that are carried out there or those associated with these nations. In principle, the volatility of prices is everyday fluctuations in market prices, which can sometimes exceed the wrong direction and can delete the good size of the investor's portfolio in this process.
bond investors face interest risks. For example, when interest rates increase, the value of bonds may depreciate. Many investment risks with fixed income will be caused by increasing inflation, as this will cause their values to drop.
For example,the risk of liquidity may be to face when the market is not willing to buy, which can make it difficult for the investor to convert assets into cash while he wants. Multi -on, active and/or lever trading in stocks brings higher investment risks that are unlikely to be suitable for many people with risks. This is due to daily stock market fluctuations that can sometimes be extreme. People with a risk aversion usually invest a larger part of their funds in relatively loware government bonds, insured savings accounts that bring low yields, etc.