Here are major risks involved in stock market investing
1) Assessing risk Numerous specialists analyse the performance and stock price of the company and then assign a rating based on their findings.
This will directly affect the movement of the stock.
Ratings, which can be either favourable or negative, frequently cause some movement in the shares.
2) Psychological danger Investors frequently make poor decisions while investing because they act emotionally.
Most of the time, investing decisions will be harmed by greed or a fear of losing money quickly.
3) Economic risk If the company's financial performance declines with each passing year, there is a danger that you could lose the money you invested. Additionally, the equity-to-debt ratio of the company is crucial. If the company is heavily leveraged, there is a risk that it won't be able to pay its debts and may even fail. Before making an investment, one should carefully review the company's finances and past performance.
4) Risk of Inflation If the company's performance and return are below the rate of inflation, you are losing money.
If, for instance, your return on investment is 10% per year and inflation is 12% per year, you are losing money since your investment is producing negative returns.
5. Political hazard When a country's government changes, there is a potential that the market's sentiment could alter depending on whether the new administration will be pro-industry or not.
6. Economy risk The health of the nation's economy has a major impact on how well financial instruments function. The growth of the nation, inflation, interest rates, the balance of payments, etc. are all examples of economic risk.
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