Thread by @BuzzingstockH

Thread 🧵on Risks associated with #StockMarket #Investing.

(Must read for everyone, especially those entered in #StockMarket recently during #COVID19 lockdown and have seen only ⬆️⬆️⬆️)

🌟Risk hai toh ishq hai ! 🌟

@caniravkaria @Vivek_Investor @dmuthuk @WeekendInvestng

Long term investment in #shares is always rewarding compared to returns generated by other #investing avenues. But at same time it contains various #risks that #investor needs to be aware of.

Some of the #risks associated with #StockMarket #Investing are explained below 👇

1⃣Economic Risk / Market Risk :

It refers to the possibility of investor experiencing losses due to factors that affect overall performance of economy and hence financial markets.

A slowdown in economy affects almost all sectors of any company in varying proportions.

#NSE #BSE

2⃣Industry Related Risk :

It refers to the possibility of an investor experiencing losses due to changes in dynamics of a particular industry or sector.

#StockMarket #Investing #BSE #NSE

3⃣ Management Risk :

It refers to possibility of an investor experiencing losses due to investing in companies having management related issues.

Success of a business depends on quality of its management. Hence it is important to assess quality of management before investing.

4⃣ Inflation Risk :

It refers to possibility of an investor experiencing losses due to increase in inflation.

Increase in inflation reduces profitability of many companies. Increase in inflation also reduces purchasing power of common man. All this results in economic slowdown.

5⃣Interest Rate Risk :

It refers to possibility of an investor experiencing losses due to changes in interest rates.

Raising interest rates can lead to slowdown in various sectors & overall economy. Similarly reducing them can give boost to several sectors & overall economy.

6⃣ Exchange Rate Risk :

It refers to possibility of an investor experiencing losses due to currency fluctuations.

For example, appreciation of Indian rupee makes imports cheaper & exports costlier while depreciation of Indian rupee makes imports expensive & exports cheaper.

7⃣ Credit Risk :

It refers to possibility of investor experiencing losses due to borrowers failure to repay a loan or meet contractual obligations.

Such scenario is common with companies having heavy debt burden, especially during down cycle of any industry or overall economy.

8⃣ Liquidity Risk :

It refers to possibility of investor experiencing losses due to lack of marketability & liquidity of investment.

This is common in stocks having low equity base & very low free float or in case of stocks which have been ignored by investors for some reason.

9⃣ Taxability Risk :

It refers to possibility of an investor experiencing losses due to changes in tax policies by government.

Changes in tax policies or tax rates can significantly alter business prospects of one or more sectors or companies.

#StockMarket #Investing #Sensex

🔟Regulatory Risk :

It refers to possibility of investor experiencing losses due to regulatory issues which may be sector specific or at times company specific.

Any unfavorable change in regulations can significantly alter business prospects of some companies or entire sector.

1⃣1⃣ Black Swan Event Risk :

It refers to possibility of investor experiencing losses due to occurrence of a black swan event.

Examples of black swan events include large scale natural disasters like floods, draughts, hurricanes, terrorist attacks, wars, etc. Latest ~ Covid19.

Best books for any newcomer to learn a lot about #StockMarket #Investing, #TechnicalAnalysis & #FundamentalAnalysis

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