ford89
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| What Is Investment Risk? |
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Of the many kinds of investment risk, most investors worry about only one: the risk of losing money.
With all the media hype about financial markets and the ease of checking on your returns—even many times a day—it's
easy to see why investors can become fixated on market swings.
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Sat Oct 10, 2009 6:14 am |
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coaster
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Investment risk should really be defined as "the probability of not getting a sufficient return on your capital to justify the probability of loss."
Putting the money under the mattress carries a near zero percent probability that you will lose the original capital, but carries a certain 100% probability that you will lose value equivalent to the annualized rate of inflation.
Putting the money into the market carries a near 100% probability that the value will fluctuate on short term time periods, but carries a near zero percent probability that you will lose value over a term of longer than ten years.
Here's an article about investment risk published by FINRA, the organization that looks out for investor's interests:
Managing Investment Risk
~Tim~
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Sat Oct 10, 2009 4:43 pm |
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John_maxwell
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There is always some degree present in every investment you purchase. At the same time, by avoiding or minimizing specific types of risk, you can keep temporary hiccups in the economy or financial markets from destroying your wealth.
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Sat Oct 24, 2009 10:56 am |
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Nick Brian
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The risk of losing money will always remain. But that's business. You do what you gotta do. High return omits the low return. That's investment. I prefer real estate investment which creates value over time.
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Sun Oct 25, 2009 3:11 pm |
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Elmira Nancy
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Investing all your money in "safe" investments will return small amounts but you have less chance of losing your capital.Some people choose to invest heavily in a medium risk market and put the capital into safe investments when they make it back, that way they only risk the profits they make.
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Wed Feb 24, 2010 10:21 am |
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Paul22
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Smart investing includes risk management. For each stock, bond, mutual fund or other investment you purchase, there are three distinct risks you must guard against; they are business risk, valuation risk, and force of sale risk.The biggest defense against business risk is the presence of franchise value. Companies that possess franchise value are able to raise prices to adjust for increased labor, taxes or material costs. The stocks and bonds of commodity-type businesses do not have this luxury and normally decline significantly when the economic environment turns south.
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Wed Feb 24, 2010 1:03 pm |
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carl12
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Location: UK
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Here I'm also sharing With You some of the Investment Risk With You all
1) Sovereign Risk
India is a vibrant parliamentary democracy and has been one since its political independence from British rule more than 50 years ago. There is no serious revolutionary movement in India; hence there is no conceivable possibility of the state collapsing. Sovereign Risk in India is therefore zero for both "foreign direct investment" and "foreign portfolio investment." It is however advisable to avoid investing in the extreme north-eastern parts of India because of terrorist threats. Kashmir in the northern tip is also a troubled area, but investment opportunities in Kashmir are anyway restricted by law.
2) Political Risk
India suffered political instability for a few years due to the failure of any party to win an absolute majority in Parliament. However, political stability has returned since the previous general elections in 1999. However, political instability did not change India's economic course though it delayed certain decisions relating to the economy.
The political divide in India is not one of policy, but essentially of personalities. Economic liberalisation (which is what foreign investors are interested in) has been accepted as a necessity by all parties including the Communist Party of India (Marxist).
Thus, political instability in India, in practical terms, posed no risk to foreign direct investors because no policy framed by a past government has been reversed by any successive government so far. You can find a comparison in Italy which has had some 45 governments in 50 years, yet overall economic policy remains unchanged. Even if political instability is to return in the future, chances of a reversal in economic policy are next to nil.
As for terrorism, no terrorist outfit is strong enough to disturb the state. Except for Kashmir in the north and parts of the north-east, terrorist activity is either non-existent or too weak to be of any significance. It would take an extreme stretching of the imagination to visualise a Bangladesh-type state-disrupting revolution in India or a Kuwait-type annexation of India by a foreign power.
Hence, political risk in India is practically non-existent.
3) Commercial Risk
Commercial risk exists in business in any country. Not each and every product or service can be readily sold, hence it is necessary to study the demand/supply situation for a particular product or service before making any major investment. There is a large number of market research firms in India (including our own) which will study demand/supply situation for any product/service and advise the potential investor accordingly in exchange of a professional fee. The IndiaOneStop website provides some accurate statistics and insights into the most viable sectors for foreign direct investments.
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Tue Mar 02, 2010 1:06 pm |
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