Market risks have little to do with a company’s overall strength,
and more to do with the affect the world’s economy can have on
the market.
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The stock market is always volatile. There are risks involved in
investing your money in a company’s stock. Savvy investors take
the time to research the company thoroughly before investing in its
stock. But one risk investors often overlook is market risk, or the
volatility of one market and how it might affect another. This was seen
in February 2007, in a dramatic turn when the Chinese stock market
dropped a whopping 9% in a single day, causing a tidal wave effect
throughout the world. The United States Dow Jones Industrial Average
fell by 4.3% in the Chinese aftermath, its worst decline since the
terrorist attacks of 2001.
The International Organization of Securities Commissions urges
investors to take the time to learn what market risks are and how they
may affect investments worldwide.
Market risks have little to do with a company’s overall
strength, and more to do with the affect the world’s economy can
have on the market.
Interest Rate Risks
Changes in interest rates directly affect the value of bonds. As
interest rates rise, the price of previously purchased bonds falls;
while dropping interest rates will increase the bond’s value.
Inflation Risks
Inflation reduces a consumer’s purchasing power, which also reduces the value of investments.
Currency Risks
When purchasing stocks or bonds issued by companies outside of the
United States,any fluctuation in currency exchange rates can directly
affect how much a stock or bond really costs, and how much you’ll
make when selling it.
Liquidity Risks
The ability to sell off your investments at the moment you choose
can greatly affect your profit margins. Being unable to make trades due
to foreign regulations, not being able to find a buyer, selling at a
discount, among other reasons may cost you valuable assets.
Sociopolitical Risks
Worldwide events such as a terrorist attack, war, and even an
election can all affect investor attitude toward the market and cause
serious up or downturns. Worse yet, some catastrophic events can lead
to wide-spread disruptions in financial markets all over the world,
which can be risky for individual investors.
ICountry Risks
Country risks are similar to sociopolitical risks, with one
important exception: they are tied to a specific country and the
economic and political climate within it.
Legal Remedies Risk
When dabbling in the oversees market, keep in mind that problems
which may arise with your investment must be handled by that
governments market overseers, which may work very differently than
those your used to in the United States. This in itself can be very
risky for foreign investors.
While no one can completely avoid all market risks - that’s
what makes the financial market so profitable - there are a few things
every investor can do to minimize the risk.
Do Your Homework
Take the time to research all of the things that can affect your
oversees investments. Stay tuned to global economic trends and changes,
and be certain that you completely understand all of the trading
practices, regulatory practices and restrictions in investing
internationally.
Diversify
Vary your holdings by region, country, length of holdings (long term vs. short term), product, and sector.
Investing is always risky. But don’t let that scare you.
Oversees markets can be very profitable, as long as the investor
understands the ever-changing market risks associated with specific
investments and takes the necessary precautions.
About The Author
helping people build more money in their retirements. Now he has taken
his successful strategies to a new level by offering teleseminar
courses to help people make a better retirement for themselves than
they ever thought possible. For more tips and strategies see http://www.retirementwealthforyou.com.
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Distributed by Hasan Shrek, independence blogger. Also run
online business ,matrix,internet marketing solution ,online store script .
Beside he is writing some others blogs for notebook computer ,computer training ,computer software andpersonal computer,Cyber Forest,internet weapon,talk about business ,business is my blood ,hasan's blog ,cyber business
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