Question | Answer |
Capital Risk description | General term for possible loss of money invested. |
Capital Risk investment issues | The risk is present in most securities. |
Timing Risk | Investing in a specific security at an inopportune time. |
Timing Risk Investment issues | Dollar cost averaging is used to avoid this risk. |
Market (systematic) Risk | Possible loss of value due to a broad market decline. |
Market Risk Investment issues (systematic) | For equities, this risk is measured by a statistic called beta. |
Liquidity Risk | Ability to quickly sell an investment at or near current market price. |
Liquidity Risk Investment issues | Regardless of type, more heavily traded securities are more liquid. |
Political Risk (legislative) | Changes in value of one currency versus another currency. |
Political Risk (legislative) Investment issues | The common wisdom is that political risk is high anytime Congress is in session. This is also used in the context of foreign securities. |
Currency Risk | Changes in value of one currency versus another currency. |
Currency Risk Investment issues | Current owners of foreign securities may see a negative impact if foreign currency weakens against their home currency. |
Opportunity Cost Risk | Loss of income or appreciation because an investment was NOT made. |
Opportunity Cost Risk Investment issues | When making one investment, one always forgoes others that might have provided a better return. |