Answer:
Sample Response: Risks for investing in the stock market include the possibility that a company could go out of business. If a corporation loses so much money that it ceases to exist then its stock no longer has any value. Another risk is that a stock may decrease in value due to various factors in the economy. If a corporation goes through a financial downtime then the value of the stock is reduced and a loss to the investor will occur if the stock is sold. Investors can reduce risk of investing in the stock market by investing in a variety of different companies. Diversification can minimize the chances of completely losing an investment because all money is not tied up in one company.
Explanation:
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Investors can reduce the risk in the stock market by monitoring the investments regularly and with the diversification.
Risk refers to the chance or probability with respect to the investments, that it will be harmed or experience an adverse effect. It is the possibility of some bad happening.
Some of the stock market risk may include interest rate risk, equity risk, commodity risk, and currency risk. They cannot be anticipated and can have negative impact on the amount invested in stock market.
The best measurement to reduce the risk in the investment is to handle the asset allocation properly and by adopting diversification in the portfolio as it can reduce the risk to an extent.
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