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What are the risks
in Stocks to consider
1. Price Risk
Prices can fall below purchase price due to economic or company-specific factors. Portfolio diversification, or spreading your investment across different securities and industries, as well as across different investment products such as funds and bonds, can help reduce investment risk and achieve more stable returns in the long term.
2. Volatility Risk
This refers to the risk when the value of a security fluctuates significantly over time. The volatility could be due to news related to the security itself, or to the broader market that affects many securities. Shorter-term price fluctuations may not be reflective of the longer-term fundamentals of the security.
3. Liquidity Risk
This is characterised by an unusually high bid-ask spread. This happens when there is a significant difference between the buying price and the selling price of the stock, and buyers and sellers cannot therefore be matched in the market.
4. Currency Risk
Investing in foreign securities enables you to diversify in different stocks across the world for your long-term portfolio, but bear in mind the risk associated with fluctuations in exchange rates.
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