What are the risks in investing into stock market?

in #investment6 years ago (edited)


There are vast amounts of risk varying to every releted sector in regards of stock investment..Now I'm not a stock broker neither a stock exchange expert and have no way whatsoever any kind of past experiences. But after I did substantial research I found that some of those risks are more serious, affective and brutal. They are as follllows.

credit risk:

This is about when you invest into a certain bond and the issuer might not be able to deliver it. So to cover his weakness he tempts investors with as much interest as possible... It might draw some greedy investors at play but very very risky for any simple and investors with low capital. Specially for investors who just came into the market.

Call Risk:

Callable bonds are very tempting to any investors as they offer more than avarage interest rate as the bond issuer releases a bond on the basis that if there is ever a need to call back the bonds they will collect it back.. This happens due to reflux in interest. And when that happens issuers collects bak all the bonds to save some money.

Currency/Exchange Rate Risk:

Suppose you bought bonds that have an issuer based on multiple countries.. and because of that those bond will have multiple currency exchange rate. Meaning suppose, they trade or exchange between usd and yen. Now if one of the currency faces an inflation or a similar event the bonds also have a major chance of collapse and drop in price.

Interest Rate Risk:

There are bonds which have a fixed rate of interest. Now the interest rate of related instruments are rising but this one because it being fixed, it will start losing interest rate as when the interest rate of other instrumens rise and the possibility of a increase in share price falls. making the investor lose money for the whole time of contract.

Business Risk:

Think of it like this. you brought stocks from a company that might have a very weak infrastructure. Now after you bought the stock the infrastructure collapsed causing the company to go bankrupt.. If this hapens you will lose all of your money possibly. If the company is brought out to auction you might get something back in return but that will not cover even a portion of your loss.

Inflationary Risk:

Inflation can decrees your investments value by a lot if you are not careful...So buy stocks carefuly and choose ones with less non liquid transaction value.

Liquidity Risk:

Liquidity risk is the risk of not being able to sell when you want to.. example would be real estate, businesses, and cryptos too I think..

Market Risk

This is the most occuring investement risk. An example would be when you buy shares but due to people not believing in it any more it drops its price. you will loose your money forever.

Social/Political / legislative Risk:

If a sudden rules or regulation makes the company, whose stocks you invested in, to become destabilzed then you might be going to come at a loss. Making it one of the most frequently felt risks allover the stock exchanges.

No risk no gain, is a saying that is as old as truth. There are risks everywhere but people learn from their mistakes.. I would say if you are new to this then research a lot and invest as little as possible, which wouldn't dent your livelyhood. And there are lods more risks which are severe also but little less than the mentioned ones.
So think before you jump and in this case research before you jump.

you can follow this link if you want to know more investopedia.com

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