When you invest, you incur risk – there’s no avoiding it. But the concept of “risk” may be more expansive than you realized. And by understanding the different types of investment risk and how these risks can be addressed, you can improve your skills as an investor.
The most common perception of investment risk is simply the risk of losing money. When you invest in stocks and stock-based vehicles, such as mutual funds, there are no guarantees that your initial investment amount will be preserved.
Generally speaking, if you hold stocks or mutual funds over a period of years, and even decades, you can reduce the likelihood of sustaining losses that could send your investments’ value to zero. Hopefully, the value of your investments will rise over time.
