Risks in Stock Trading

What does a Market Risk imply?

Market Risk

• This is the risk of investing in the stock market in general. It refers to a chance that a security’s value might decline

• Although a particular company may be doing poorly, the value of its stock can go up because the stock market value is collectively going up

• Conversely the value of the stock might drops because of negative factors inflation, rising interest rates, political instability etc.

What does an Industry Risk

imply?

Industry Risk

• This is risk that affects all companies in a certain industry

• For e.g. Utility companies, are often viewed as relatively low in risk because the utility industry is stable and operates in a predictable environment with relatively little change

• In contrast, internet and other technology industries are usually viewed as high in risk because the industry is changing so quickly and unpredictably

What does a Regulatory Risk

imply?

Regulatory Risk

• Virtually every company is subject to some sort of regulation. It refers to the risk that the government will pass new laws or implement new regulations, which will dramatically affect a business.

What does a Business Risk

imply?

Business Risk

• These are the risks unique to an individual company

• It refers to the uncertainty regarding the organizations ability to perform business or provide service

• Products, strategies, management, labour force, market share, etc. which are among the key factors investors consider in evaluating the value of a specific company

Risks in Stock Trading

Remember: • All stocks are affected by market risk• All stocks within an industry are subject to industry risk• All stocks are subject to regulatory risks due to government

policies and a company can be affected by business Risk

Thank You!

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