The Dirty Dozen Investing Risks
#1 Inflation riskIt's known as Public Enemy #1 because it hurts all of us consumers.
As the prices of goods and services rise over time, our money buys less and less.
#2 Company riskThis is the most obvious investing risk. Have we chosen a company that will succeed?
If it does poorly going forward, then we’ve not chosen wisely.
#3 Economic riskIf investors are surfers, then the economy is the wave they're riding.
If the overall level of economic activity slows, it will likely impact the investments they hold.
#4 Longevity riskA difficult challenge investors face is not knowing how long they'll live.
There’s a chance they’ll outlive the “nest egg” they’ve built over their careers.
#5 Legislative riskGovernments are always on the look-out to protect us from harm.
They may decide to restrict or prohibit the activities of a corporation you’re invested in.
#6 Country riskSometimes the best investment opportunities require investing outside the U.S.
But, not all countries have strong investor protections. It’s critical to investigate the country within which you want to invest.
#7 Systemic riskTo buy, hold and sell fairly valued investments depends on a functioning financial system.
In times of crisis, the financial system can freeze up, causing rippling harm worldwide.
#8 Execution riskTroubled corporations may announce bold plans to regain market leadership.
But, can they execute? Should investors believe they’ll achieve what they’ve announced plans to do?
#9 Market riskNormally functioning markets will fluctuate with supply and demand driven by buyers and sellers who come and go.
Investors who sell during market dips will lock in lower prices than they’d receive if they waited for a rebound.
#10 Timing riskWhat if you purchase an investment and soon after the corporation announces...
… terrible financial results or other bad news which makes the stock plunge?
#11 Liquidity riskWhat good is owning an investment if you can't get a fair price when trying to sell it?
The ability to sell an investment quickly for a fair price is known as liquidity.
#12 Geopolitical riskHostile nations can fight each other while avoiding conventional warfare.
They do so by penalizing the corporations that are based in the country they wish to harm.
#13 Interest rate riskInvestments that earn a set rate of interest lose value when interest rates rise.
The reason is that new investments will pay the new higher rate and be more attractive.
Bonus: More risks!We're not done. There several more risks investors may be subject to.
Let’s take a brief look at them.
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