Types of Investment Risks

This risk affects all stocks due to economic conditions, geopolitical events, or market sentiment. It can't be avoided, but diversifying your portfolio can help reduce its impact.

1. Market Risk (Systematic Risk)

Stocks can experience rapid price changes, leading to potential losses. Understanding a stock's volatility and using strategies like stop-loss orders can help manage this risk.

2. Price Volatility

This occurs when you can't quickly buy or sell a stock at a good price. Invest in stocks with high trading volumes to avoid this risk.

3. Liquidity Risk

The risk that a company might default on its debts. Assess a company's financial health and credit ratings before investing.

4. Credit Risk (Default Risk)

Company-specific risks like competition, management effectiveness, or financial issues can impact profitability. Diversify your investments across different industries to reduce this risk.

5. Business or Financial Risk