SYSTEMATIC RISK.
systematic risk of risk affects a large number of assets. A great political event, for example, can affect many of the assets in the portfolio. It is almost impossible to protect against these risks.
UNSYSTEMATIC RISK.
Sometimes called specified risk. This type of risk affects a very small number of assets. An example of this is the news that affects specific populations, such as sudden strike by employees. Diversification is the only way to protect themselves from an irregular risk. Diversification discuss later in this tutorial.
Now that we determine the basic types of risks, we will see more specific types of risk, especially when it comes to stocks and bonds.
Credit or default risk .
Credit risk is the risk that the company or individual will not be able to pay the contractual or equity or debt interest obligations. This type of risk is a particular concern for investors who hold bonds in their portfolio. Government bonds especially those issued by the federal government have the least amount of risk of default and lower yields while corporate bonds tend to have a higher amount of default risk but also high interest rates. Bonds are considered less risk of default to be investment grade while bonds are considered a higher probability of being junk bonds. bond rating services such as Moody, allows investors to determine which are investment grade bonds, junk bonds. For more information, see junk bonds: all you need to know. what is the credit rating for companies and corporate bonds an introduction to credit risk.
COUNTRY RISK.
The country risk refers to the risk that the country will not be able to meet its financial obligation. When the country fails to meet its obligations, and this can be detrimental to the performance of all other financial instruments in this country and other countries that have relations with. the populations of countries at risk, bonds, mutual funds, options and futures contracts, which are issued in a given country applies. This type of risk is often seen in the markets or countries with emerging severe disability. For related reading, see What is an emerging economy?
Foreign exchange risk .
when investing abroad must take into account the fact that currency exchange rates may also change the underlying price. The exchange risk for all local financial instruments that are in a currency. For example, if you live in the United States and investment in some Canadian populations in Canadian dollars, even if the estimated value of stock, you can lose money if the Canadian dollar depreciates against the US dollar.
Interest rate risk.
Interest rate risk is the risk that will change the value of the investment as a result of a change in interest rates. This risk affects the value of bonds more directly than stocks. For more information, please read how interest rates affect the stock market.
Political risks .
political risk is a financial risk for the government in a country suddenly change their policies. This is the main reason why developing countries lacking foreign investment.
Market risk .
This is the best known of all risks. It is also known as volatility and market risk is the daily volatility of stock prices. Market risk mainly applies to shares and options. As a whole, stocks tend to perform well during a bull and a bad market during the bear market - the volatility is not so much why, but an effect of certain forces in the market. Volatility is a measure of risk as it relates to behavior, or "temperament" of private investment and not the reason for this behavior. Because the market movement is the reason why people can make money from the action, and volatility is essential for the return and investment more volatile in which there is more chance that you will experience a radical change in one way or another.