Doing investments in financial market is quite essential now a day’s. Moreover each and every individual are concentrating more on it due to hectic competition in the market. Apart of its adequate benefits, there are risks featured in terms of investing your money in the market.
- Majorly market risk. It is affected in the complete financial market due to economic developments. In this scenario, there are of 3 types of market risk are discussed below;
- Equity risk is effected to the people those who invest their money on shares. Based on demand and supply, market price may differ accordingly. Due to loss in market price of shares, this equity risk may exist.
- There is an interest rate risk, it defines that when the interest rate goes higher than the investment bonds market value get lower subsequently.
- There is a currency risk happens mostly in foreign investments only. It is a kind of risk in terms of losing money due to exchange rate movement.
- The concentration risk is a risk of loss that may happen to the type of investment only. It may also affect to the different investment types especially in case of diversifying your investments. Actually Holborn Assets investments provide their investors with clear knowledge upon various risks that they encounter during investments.
- Other form of risk namely liquidity risks. It is popularly raised risk especially when are not able to purchase your investment at a reasonable and fair price. For selling any kind of investment, you are supposed to accept fewer prices. But in some situations, it is not at all possible to sell the particular investment you are desired to. For example in exempt market investments type.
- There is a credit risk which affects to the people those who had debt investments and to the people those who had bonds. According to research and reports, Canada government has less credit risk of investment especially.
- The risk that affect you when the interest rate falls off and you are going to reinvest it with the interest payments done regularly. This risk also affects to the people those who had the bond and which it got matured. This kind of risk of loss is affected majorly from income or less interest rates only. This kind of risk is known as reinvestment risk.
- Inflation risk is a risk that arises when you face loss rate on your investment sale. It is due to; you cannot keep up the same value of your investment sold compared with the inflation rate. This risk is mostly affected to the people those who had cash or debt investments majorly.
- There is a risk encountered especially at abroad or foreign countries in terms of loss. It is essentially seen in purchasing foreign investments. This kind of risk is termed as foreign investment risk.
- There is another form of risk known as longevity risks. It is a risk which is mostly happened to the senior citizens those are retired ones.
- There is a risk which happens unexpectedly without any prior intimation. Consider if you lost your job, you are supposed to purchase all your investments which you put those investments on hold for a long period of time. Moreover you may lose your more sum of amount of money if you sold your investments under pitfalls of market condition. This kind of risk is known as horizon risk.
Conclusion: from the above discussion, there are several risks are featured in investment. So be careful before going to invest in financial markets.