The 4 Risks Your Stocks Take

Dealing in the stock market is not an easy job. Other than making sure that you have enough capital you also have to think about which market should you choose, what financial instrument should you trade in, which trading strategy should you employ and all other factors to consider. And of top of this, you still have to think about the risks. An investment is always with risk that’s why knowing what you’re up against is essential to your success. Here, we present the top four risks that you would have to face when trading in stocks.
Commodity Price Risk
Commodity Price Risk is the risk that the changing commodity prices influence on companies. Basically, businesses which sell commodities are happy when the prices go up. Meanwhile, businesses that use commodities as resources are happy when prices go down.
Rating Risk
Rating risk is the risk that the company faces whenever it is judged given a certain standard. Analysts give a company a credit rating on whether it is performing well or not. This assessment affects the company as it is seen by investors and other market participants as an indicator of whether to invest or not.
Legislative Risk
Legislative risk is the risk that is undertaken in the link between the company and the government. In this risk, there is a chance that the government or law will either hinder or slow down a company’s development. For example, the government of a certain country is implementing a regulation that is delaying a company’s production. Other examples are taxes, lawsuits, and procedures.
Interest Rate Risk and Inflationary Risk
Interest Rate risk and Inflationary risk are risks that have to do with financing. A company may have difficulty taking off if financing is having difficulty paying off interest rates. More so in the time of inflation.
As said earlier, dealing in the stock market is not an easy job but it is rewarding. There is no investment that has no risks. If there is, it is probably a scam. The best thing that you can do is to be prepared for any outcome. Know the risks that you and your stocks will take so that you won’t regret anything in the end.