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types of investment risk

types of investment risk

August 17, 2022

Most often, when the investing public talks about risk, they're referring to the risk that you can lose money or experience price fluctuation.  However, there are many different types of risk, and every investment is susceptible to multiple types.  

A partial list:

inflation risk - the risk that your investment won't keep up with inflation

market risk - the risk that an investment will go down because the market as a whole does

currency risk - the risk that the value of an investment will be affected by changes in currency values

liquidity risk - the risk that there's not a buyer when it comes time to sell an investment

interest rate risk - the risk that the value of an investment will decline if interest rates rise

political risk - the risk that values will change due to instability in a country

reinvestment risk - the risk that you'll have to invest capital at a lower interest rate when an investment matures

It's impossible to invest without assuming risk.  However, understanding risk and how it factors into your entire portfolio is a good start to managing it.