What are the Risks Involve When Investing in Stocks

by Gily Tenorio on July 19, 2013

in Stocks

Investing in stocks involves risks. All investments have risk of losing money because no one can guarantee that you can make a profit. However, you can lessen the risk by carefully selecting the type of investment that you will venture out.

Even starting and owning a business involves risks. Actually, according to the statistics, more than 90% of businesses failed during their first year of operation.

risks of stock investing

Since investing in stocks is becoming popular these days because of the media mileage and attention given to it by TV companies, I would like to list and point out the risks involve when investing in stocks. Some people maybe clueless what stocks can bring to them because they are newbie in this thing.

For those people who have a little or advance background in stocks, I could say that you may already know what risks you are taking when putting your money on the stock of a company.

In this post, I would like to warn you about the risks you’re entering when investing in the stock market.

 

1. You may Lose Money

 

It is a fact. Investing in stocks is not a sure way to earn money because there are many factors you need to control to be able to do so. Losing money in stocks will only happen when you make a mistake of selling your shares for a price lower than the price when you bought it.

 

That’s why it is very important when investing in stocks that you have the discipline and self-control. Make sure that the money you invest in stocks will be there for more than 5 years or more.

 

In order not to lose money, don’t sell your shares for a price lower than you bought. However, in case you need to, that’s the only time you will lose money in stocks.

 

2. Profit is not Guaranteed

 

Earning a profit is not also sure fire when investing in stocks because you should control many factors. But the sad truth is, you cannot control all things like the response of majority of investors when there’s a bad news about the economy.

 

All legitimate investments have no guarantee of profit. Thus, if someone offers you an investment and they said that you will earn a sure profit, there’s a big chance that it is a scam.

 

Don’t become a victim of scam. Always study and understand what you are venturing out. Talk to friends and trusted relatives that know about investments like stocks and mutual funds so that you have firsthand information from the real people who invest in the stock market.

 

3. Stock Price may Go Up and Down

 

The price of stock depends on many factors. For example, the price may depend on the news on how it is performed in the previous year.

The performance of the company behind the stock greatly affects its stock price. Though there are many technical analyses, sometimes, it is not followed.

Therefore, it is very important that you don’t panic when the price is going down because for sure it will go up in the future especially for those big and established companies. Don’t sell your shares right away because you will lose money when you do so.

Wait until the price go up and sell on your target price where you can make a good profit. Some people suggest you can sell at 20-30% profit.

 

Final Thoughts

 

There’s several risks when investing in the stock market. Many people are clueless about it because they don’t want to study and understand what are they entering.

It is always good that you understand first the business of the company behind the stock. Even though you don’t know technical matters like P/E ratio, dividend, debt- to-equity ratio of the stock, you should as much as possible study how the company is doing business and who are the people managing the company.

 

About the Author:

GilGil Tenorio is a blogger, a husband, a father, and an active Christian. He likes playing guitar, C.S. Lewis, Plants and Zombies and NBA. Follow him at Facebook, Google+, YouTube and Twitter. Thanks!

 

Image Source: Pixabay

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{ 1 comment… read it below or add one }

StockMarket101 June 26, 2014 at 03:45

Learn more about investing in the Philippine stock market, visit pseacademy.com.ph

The PSE Academy is the official market education website of the Philippine Stock Exchange, Inc. (PSE) created in partnership with the PSE Foundation, Inc.

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