Investors face different types of risk, many of whom unfortunately are unaware of most of the investment risks that their projects may involve. When you invest, you will be exposed to a combination of risks that are unavoidable in any case, and most of them are also unpredictable. However, you can manage these risks and get the best performance for your investments.
Market risk
It is about the risks of depreciation due to economic developments or other events affecting the entire market. The main types of market risk are equity risk, interest rate risk and currency risk.
Equity risk
The market price of shares varies at all times depending on demand and supply. Equity risk is the risk of loss due to the low market price of the shares.
Interest rate risk
It is about he possibility of losing money due to a change in interest rate. For example, if the interest rate rises, the market value of the bonds will decline.
Liquidity risk
It is one of the main types of investment risk. It is about the risk of not being able to sell your investment at a fair price and get your money when you want to. To sell an investment, you may need to accept a lower price. For example, some assets like gold can be easy to sell, while investments in some assets such as real estate are difficult to sell in a short time. In order to reduce liquidity risk, investors must ensure that their portfolio is well balanced so that their investments can be easily sold and it is also important to maintain sufficient cash reserves to cover emergencies.
