Monday, 13 August 2012

Risks Involved In Indian Stock market

When you make any investment in the stock market, you take a risk at your money. So steps should be taken in order to avoid investment risks. Let us have a look at the different kind of risks that are involved in investment.

Liquidity Risk: When we say liquidity risk, we mean the investment which can be converted into money very quickly without undergoing any losses. Liquidity risk needs to be managed in addition to market, credit and other risks. You should always look for net cash flows on a day-to-day basis in the Indian stock market.

Credit Risk: Credit risk is that type of risk where a borrower is not able to pay its debt. When we talk about debt, it means that the debt can be a principal amount or interest or both of them. This happens normally when the market of a company’s share suddenly decreases or goes bankrupt.

Market Risk: Have you heard that the value of a stock has gone down? This is called market risk. This normally happens when there is a change in the rate of interest, or commodity rates and so on. You should always monitor your investment plan periodically if you wish to invest in stock markets. Also you need to know more about share tips.

Inflation Risk: Inflation risk is another risk associated with investment that lowers the value. You should invest in growth assets like stocks if you wish to avoid inflation risk. Retailers, hotels, resorts…etc are all harmed by inflation risk in the market whereas agricultural products, tire, rubber goods…etc are less harmed by inflation.

In order to avoid inflation risk, invest in growth assets like stocks. But it is always important to ignore ups and downs of the market and always focus on long term returns. So get some share tips from your broker so that you come to know everything how to invest in shares and when to invest. [ Via ]

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