investing involves risk and that there are different types of risk that can adversely affect their investment return. With that being said, here are 8 risk factors to consider, before pursuing an investment opportunity of any kind.
When investing in foreign countries you must consider the fact that
currency exchange rates can change the value of the asset as well.
Credit or Default Risk:
This is the risk that a company or individual will not be able to pay
the interest or principal on its debt obligations. This type of risk is
very concerning for investors who hold bonds in their portfolios.
Systematic Risk: A significant political event, for example, could affect several of the assets in your portfolio.
Unsystematic Risk: An example is news that would affect a specific stock, like a sudden strike by employees.
This is the risk that a country will not be able to honor its financial
commitments. This can also harm the performance of other investments in
countries the default country has relations with.
Political Risk: This represents the financial risk that a country’s government will suddenly face if it changes its policies.
Interest Rate Risk:
This is the risk that an investment’s value will change as a result of a
rise/drop in interest rates. This risk affects the value of bonds more
so than stocks.
Market Risk: This is the most familiar of
all risks. Also referred to as volatility, market risk is the
day-to-day fluctuation in stock market prices.
investor, or one with a high risk tolerance, is someone who is willing
to risk losing money; to potentially earn a better return. A
conservative investor, or one with a low risk tolerance, often prefers
investments that are more likely to maintain the original investment
value. It is important for you to identify what kind of investor you are
and determine how much exposure to risk you are comfortable with,
before investing. This approach will increase your odds of choosing the
investment offerings that can deliver long-term investing success and profits with less associated risk.
What Are The Types of Investment Risk When Investing?
Posted by Michael Young
Labels: investment risk
An entrepreneur at a young age, I began my first business when I was 9. I would sneak on to the private golf club course and search for lost golf balls in the woods and water. Some days I would find a hundred or more. After taking them back home and washing them thoroughly, I would return to the golf course and sell the balls I had found, a dozen at a time.
The point I am getting at is that I have always found unconventional ways to earn and save money.