Risks Of Investing In Stocks

All forms of investing involve some degree of risk and stock investing is no different. It’s important that beginner investors are aware of the risks.

Some of the main risks associated with investing in stocks include:

Market risk

This is the risk that economic developments or other events will negatively impact the entire stock market and send stock prices lower across the board

Stock-specific risk

This is the risk of a particular stock underperforming. Every stock has its own unique set of risk factors and it’s important to be aware of the risks before investing.

Liquidity risk

This is the risk that you might not be able to sell a stock you own at a fair price due to a lack of buyers. Liquidity risk tends to increase during periods of stock market volatility.

Leverage risk

While leverage is a powerful tool that can magnify gains, it can also magnify losses. If a large amount of leverage is used to trade, even a relatively small price movement in the wrong direction can result in substantial losses. It’s important to be aware that losses can exceed the amount invested.

Reprinted from eToro, the copyright all reserved by the original author.