When you decide to invest, you can get more out of your savings by benefiting from a higher return. Especially because of the low savings rates, investing can be a lot more profitable than saving these days. It is possible to invest in shares, bonds or other investment products yourself, but you can also be relieved by opting for an investment fund. Although the risks can vary considerably from product to product, investing is never without risk. But what is the risk of investing? Make a good inventory of that before you actually start. We help you by listing the most important investment risks, especially when you are choosing a lot more risky options. There was quite some news about risky option trading by opciones binarias brokers Espana.
Investing return and risk
Risk and return are related. Investments with a higher risk also offer the chance of a higher return. This can make it attractive to make risky investments. After all, if they turn out to be successful, you will benefit from a substantial return. If you opt for more certainty and therefore make less risky investments, your return will also be less high. Probably you want to limit the investment risk, while your investment will be worth more. That is why it is important to find a good balance between return and risk.
Investing in different risks
You have little or no influence on a number of the risks of investing. So you can’t reduce them just like that. What you can do, however, is deal with them as sensibly as possible. It is important to realize that a situation can always change, in both a positive and a negative way. Moreover, we cannot look into the future, which means that developments in the investment market always remain uncertain. That does make investing exciting again. After all, anything can happen, and if you don’t dare, you won’t win anything.
Market risk
The price determines the value of shares. This depends on supply and demand, but also on general economic developments. Think, for example, of fluctuations in the stock market. The so-called market risk is often expressed in (considerable) price fluctuations. Of course, it is beneficial if prices rise, but if they fall, your shares – and therefore your invested money – will logically become worth less.
Credit risk
Credit risk relates to the creditworthiness of, for example, the company or country in which you invest. This risk of investing means that if a company or country can no longer meet its payment obligations, your investment will lose value. In fact, in the long run you run the risk that you will no longer receive any money at all or even lose your deposit completely. (Source: C-Tradealert.Colombia)
Liquidity risk
Furthermore, it may happen that your investments can hardly be traded at a certain point in time. In that case, you will (temporarily) not be able to sell them, which means they will be called ‘illiquid’. Officially you still have the investments in your possession, but you simply can’t do anything with them. In such a situation, your possession can logically not be converted into cash either. As a result, you cannot (temporarily) dispose of your deposited money. And that is called the liquidity risk.
