There are more risks than just losing capital. All investment portfolios, when being constructed, need to comprehend and analyze all of the risks that investors face. Below is a list of the major risks all of us face.
||The most obvious risk of investing; any capital invested could grow or decrease based on market performance.
|Purchasing Power Risk
||Often times people forget the negative impact their specific cost of living increase may have on their purchasing power. If you aren’t beating your cost of living increase, your investments are putting your purchasing power at risk.
||Too many portfolios have investments that are too heavily correlated, meaning that investments rise and drop together. Portfolios need some investments that will go up when other markets are going down. By properly diversifying, investors can minimize their correlation risk.
||Some investments leave investors too illiquid, which can prevent them from accessing needed funds if trouble arises.
||When investing, fraud is an unfortunate risk. Digging deep into facts is often a crucial step that many fail to do.
||Markets can change unexpectedly, so the timing of entering investments can lead to different risks and rewards.
|Loss of Opportunity Risk
||If investing in a specific venture, funds might not be available for a different opportunity that could emerge.