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Risks in Stock Trading

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What does a Market Risk imply?

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Market Risk

This is the risk of investing in the stock market in general. It refers to a chance that a security’s value might decline

Although a particular company may be doing poorly, the value of its stock can go up because the stock market value is collectively going up

Conversely the value of the stock might drops because of negative factors inflation, rising interest rates, political instability etc.

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What does an Industry Riskimply?

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Industry Risk

This is risk that affects all companies in a certain industry

For e.g. Utility companies, are often viewed as relatively low in risk because the utility industry is stable and operates in a predictable environment with relatively little change

In contrast, internet and other technology industries are usually viewed as high in risk because the industry is changing so quickly and unpredictably

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What does a Regulatory Riskimply?

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Regulatory Risk

Virtually every company is subject to some sort of regulation. It refers to the risk that the government will pass new laws or implement new regulations, which will dramatically affect a business.

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What does a Business Risk imply?

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Business Risk

These are the risks unique to an individual company

It refers to the uncertainty regarding the organizations ability to perform business or provide service

Products, strategies, management, labour force, market share, etc. which are among the key factors investors consider in evaluating the value of a specific company

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Risks in Stock Trading

Remember: • All stocks are affected by market risk• All stocks within an industry are subject to industry risk• All stocks are subject to regulatory risks due to government

policies and a company can be affected by business Risk

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Thank you