The major risks in Stock Market Investing | Fusion - WeRIndia

Many people invest in the stock market to get profits. It is important to know that risk and return are inversely related. In order to minimize that risk, you should have a diversified portfolio. Here are the main risks involved with stock market investing.

Rating risk

There are many experts who analyze a company and give their rating towards it. Be sure to study these ratings well before you invest. The ratings can even swing the shares.

Emotional risk

Many investors tend to make mistakes in investing by making decisions emotionally. Greed or fear can cloud your judgment.

Financial risk

If a company is not performing well financially with each passing year, then you can lose your investment money. The company’s equity-debt ratio also plays a major role in profits. If the company is highly leveraged, then there are chances of not meeting liabilities and the company can go bankrupt.

Inflation risk

You can face losses if the performance and return on the company are less than the inflation rate.

Political risk

You should watch the government of the country very closely. When a government changes, the market mood will most likely change depending on how industry friendly the new government is. Make sure you plan your investments accordingly.

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