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