28 Apr
28Apr

Investment risk is the likelihood and probability for losses to happen relative to the expected return on any investment. Risk is the chance that investor expectations on their assets to gain value are not realized and always includes the possibility of loosing some or all of their money. On this platform we talk a lot about the risks and rewards present when you invest in the financial market. and at this point you should know that risk and reward are inseparable components in life and even more characterized in the world of investing.

When you make the decision to invest in a company, business or any type of asset, the value of your investment either goes up or down, If you invest in the stockmarket for example and it goes up, the value of of your investment increases, If it goes down or crashes your investment value drops. So investing basically means your investment either performs and increases in value or crashes and you loose some or all of your funds.

Knowing the possibilities of losses are always present and the risks associated with investing the question now is.....

WHY SHOULD ANYONE INVEST ?

Everyone is exposed to some type of risk everyday  whether you know it or not, whether it's driving, walking down the street, travelling, getting sick, and so on, anything could happen at anytime as we go about our daily activities. Investing is no different, No one knows the future, but we still make plans, hope tomorrow comes and the future is better. Investing is basically committing your financial resources towards a future financial goal and if it's done correctly there's always the possibility of reaping huge rewards and escaping the rat race regardless of the risk present.

So instead of worrying about the possibility of an investment failing to appreciate in value, or if you will lose all your money, You should also check for the positives. like the asset performing well, being worth 10 times or more your initial investment. And even if things go badly and it fails you could gain experience and learn about how and what to avoid.

TYPES OF INVESTING RISKS 

Despite the inherent risks associated with the financial market, it's a necessary vehicle to include in your financial plans. Let's review two(2) types of investment risk you should learn to recognize as threats. there are a few others, But these are very important.

1. Volatility Risk

Volatility describes unpredictable changes in the volume, value and price of an asset over a period of time. No matter how well a company stock or any asset performs, it's still subject to volatility. It's the nature of the market to rise and fall, But the risks associated with participating in the market can be reduced and managed to reach your investing goals.

A well diversified portfolio that contains a mix of assets will likely be less volatile over the long term, as losses in  one area will be balanced with gains in other areas. Dollar cost averaging(DCA) can also help manage volatility risks.

2. Company Risk

Poor performance in a company can cause it's stock value or price to fall. If you own shares in a company that fails to produce enough profits this will lead to a drop in the value of your investments. this can be avoided by doing your research or consulting a professional before deciding to buy any company shares. To manage company risk you should analyze quarterly earning results, read commentaries from analysts, customers and other investors and consider other variables before deciding if you will invest or not.

WHAT YOU SHOULD DO

Risk and reward go hand in hand, So you must do all you can to protect the value of your money. when you decide to invest in any asset. You must find a good balance between the highest possible return and the lowest possible risk with any potential investment opportunity. never put all your eggs in one basket and also, thinking long-term helps.

At the end of the day it's your money, so you need to be fully aware of the risks involved with investing and be comfortable with any risk you decide to take or you just completely stay away from investing.

If you are not sure you could ask for some advice here at Sampedia, Our team of professionals will ask you a series of questions to help you decide whether to invest , how much you can afford to invest, how much is right for you, And the right asset class to invest in.

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