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Key Risks in Investing in Securities Market

Before you start investing in securities market, you need to understand and identify your investment goals, objectives and risk appetite (the extent up to which you are willing to take risk).Please see video on Invest only after carefully analyzing risk return profile

Key Risks


  • Market Risk or Systematic Risk: It means that an investor may experience losses due to factors affecting the overall performance of financial markets and general economy of the country.
  • Inflation Risk: Inflation risk is also called as purchasing power risk. It is defined as the chance that the cash flows from an investment would lose their value in future because of a decline in its purchasing power due to inflation.
  • Liquidity Risk: Liquidity risk arises when an investment can’t be bought or sold promptly.
  • Business Risk: It refers to the risk that a business of a company might be affected or may stop its operations due to any unfavourable operational, market or financial situation.
  • Volatility Risk: Volatility risk arises as the Companies’ stock prices may fluctuate over time.
  • Currency Risk: It refers to the potential risk of loss from fluctuating foreign exchange rates that an investor may face when he has invested in foreign currency or made foreign-currency-traded investments.

How to Mitigate the Risk?

The investors can try to mitigate risk by different means. Asset allocation is one strategy through which an investor can mitigate risk by diversifying their investments into various companies and asset classes.