Investing involves risk, and as we’ve been working together, we’ve discussed your risk tolerance regarding your portfolio. But in the world of finance, risk can take many forms.
Here are a few types of risk that I look at when considering any potential investment:
- Business risk. How healthy is the company behind the investment?
- Market risk. How well will this investment handle the ups and downs of the market and any major economic changes?
- Inflation risk. Will this investment make sense if overall prices go up?
- Liquidity risk. If we need to get rid of an investment in your portfolio, is there a market for it?
- Interest rate risk. This risk entails an investment’s potential to lose value due to a change in interest rates. In my next email, I’ll explain more about interest rate risk as it relates to the bond market.1
Have questions about risk and how it affects your portfolio? Give me a call and we’ll get the conversation going.