When it comes down to investing, there is almost always guaranteed risk. Investing in stocks and other types of funds poses the risk of value being lost. In today’s economy, it is extremely important that you know what risk is and how you can best manage it after you have proceeded with investing. Keep reading to learn more.
Once you have decided to invest, you have to figure out what all you want to do with your assets. The future of your financial assets depends on risk, and risk is “the possibility that a negative financial outcome that matters to you might occur,” (FINRA). There are different types of risk: market risk, business risk, political risk, currency risk, and more. When it comes down to your investments, there are several different types of risk. Below, we will explain the gist of business risks and market risks.
Business Risks
Business risks include management and credit risks. According to FINRA, management risk is integral to the everyday operations of a business.
Credit Risk is defined as “The risk that a bond issuer will fail to make interest payments or to pay back your principal when your bond matures,” (FINRA).
Market Risks
There are numerous types of market risks that you should be knowledgeable about. Right now, as we have all seen, the markets have been a rollercoaster. There are sociopolitical risks, country risks, currency risks, interest rate risks, inflation risks, liquidity risks, and legal remedy risks that come along with potential changes in the market. To learn more about what each of these risks means in full, read here.
How You Can Best Manage Your Investment Risk
Currently, the best thing you can do is be aware of the risk your investments pose. You will always have risk, regardless of what type of investment you make. To better understand the potential risks, make sure you read about each type and how they could impact your particular asset investment.
Staying on top of the news and making sure you understand how today’s economy affects your assets and where you have them invested is one of the key ways to best manage your risk. As there are several different types of risk, there are numerous investment options to choose from. Learning about each by doing your research on how they could impact your investments starts with taking the initiative. To make sure you are properly informed of and aware of the possible consequences regarding your investment risk, let’s schedule a call to go over how we can best manage your assets and where you have invested them.
Sources:
https://www.finra.org/investors/insights/investment-risk
https://www.finra.org/investors/learn-to-invest/key-investing-concepts/reality-investment-risk