Understanding investment risks is crucial for making informed financial decisions. Explore the potential risks associated with each investment category.
Unlisted Shares
Investing in unlisted shares comes with key risks:
- Illiquidity: Selling shares may take time.
- Market Performance: Growth expectations may not be met.
- Transparency Issues: Financial details may be limited.
Mutual Funds
Mutual funds are subject to market fluctuations:
- Market Risk: Economic downturns may lower returns.
- Performance Variance: Funds may underperform.
Equity and Derivatives
Stock market investments carry risks:
- Market Volatility: Prices can fluctuate unpredictably.
- Leverage Risks: Higher risk due to amplified losses.
- Liquidity Issues: Exiting trades at the right price may be difficult.
- Complexity: Advanced strategies require expertise.
Savings
Fixed savings options also carry risks:
- Interest Rate Risk: Government rates may change.
- Liquidity Restrictions: Some options have lock-in periods.
- Inflation Risk: Returns may not keep up with inflation.
Bonds & Debentures
Bonds and debentures have associated risks:
- Interest Rate Risk: Market fluctuations can affect bond values.
- Credit Risk: Issuer default may lead to losses.
- Inflation Risk: Fixed payments may lose value.
Market Linked Debentures (MLDs)
Market-linked debentures depend on external factors:
- Market Dependency: Returns depend on index performance.
- Liquidity Risks: Selling early may reduce returns.
- Taxation Considerations: Tax treatment varies.