D.28 Types of investment risk Flashcards

Type of risk that affects the entire market and cannot be diversified away.

Type of risk that is specific to a company or industry and can be reduced through diversification.

The risk of losses due to overall market movements.

Changes in this will negatively affect the value of an investment, particularly bonds. When this rises, bond prices typically fall.

The risk that the purchasing power of money will decline, eroding the real return of investments if returns do not keep pace

The risk that an investment cannot be quickly sold or converted to cash without a significant loss in value.

The risk that a borrower (such as a bond issuer) will fail to make required interest or principal payments.

The risk that future proceeds (such as bond coupon payments) will be reinvested at a lower rate than the original investment.

The risk of loss due to fluctuations in exchange rates when investing in foreign assets.

The risk that political events or instability in a country will negatively impact investment returns, particularly in international investments.

The risk that a specific company will perform poorly due to internal issues such as management decisions, product failures, or financial mismanagement.

The risk of significant losses due to a lack of diversification, where too much is invested in a single security, sector, or geographic region.