What Investment Risks Should I Know About?

Taken by itself, the word "risk" sounds negative. But broken down into what it really stands for in terms of investing, it begins to be a little more manageable. By understanding the different types of risk and keeping an eye on your investments, you may be able to manage your money more effectively. Remember, strategic investing doesn’t mean "taking chances" so much as "making decisions." Long-term investing and diversification may be some of the most effective strategies you can use to help manage investment risk; however, neither guarantees against investment loss.

Inflation Risk

The main risk from inflation is the danger that it will reduce your purchasing power and the returns from your investments. If your savings and investments are failing to outpace inflation, you might consider investing in growth-oriented alternatives such as stocks, stock mutual funds, variable annuities, or other vehicles.

Interest Rate Risk

Bonds and other fixed-income investments tend to be sensitive to changes in interest rates. When interest rates rise, the value of these investments falls. After all, why would someone pay full price for your bond at 2% when new bonds are being issued at 4%? Of course, the opposite is also true. When interest rates fall, existing bonds increase in value.

Economic Risk

When the economy experiences a downturn, the earnings capabilities of most firms are threatened. While some industries and companies adjust to downturns in the economy very well, others — particularly large industrial firms — take longer to react.

Market Risk

When a market experiences a downturn, it tends to pull down most of its securities with it. Afterward, the affected securities will recover at rates more closely related to their fundamental strength. Market risk affects almost all types of investments, including stocks, bonds, real estate, and others. Historically, long-term investing has been a way to minimize the effects of market risk.

Specific Risk

Events may occur that only affect a specific company or industry. For example, the death of a young company’s president may cause the value of the company’s stock to drop. It’s almost impossible to pinpoint all these influences, but diversifying your investments could help manage the effects of specific risks.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2012 Emerald Connect, Inc.

Mile High Investments, LLC is currently registered to transact financial advisory business in New York & New Hampshire. Mile High Investments, LLC may transact business in any other state if excluded from registration, exempted, or becomes registered, according to state investment advisor requirements.

Mile High Investments, LLC is a Registered Investment Adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Past performance is not indicative of future results. Investments involve risk and unless otherwise stated, are not guarantedd. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed here.

Nothing in this web site is an offer or solicitation to buy or sell securities, or a recommendation of any particular security.

Everything in this web site should only be considered in the context of all local, state, and federal laws, including securities laws, and applicable only where allowed by those laws, and otherwise ignored.

Investments Products:
Are not insured by the FDIC or any federal government agency
Are not deposits of or guaranteed by the bank or any bank affiliate
May lose Value