The first step is to identify actions, inactions, and behavior that can lead to negative results or shortfalls. This is the most critical step, because it’s difficult to control or manage a risk on which you have not focused.

Here are a few risks commonly associated with investors:

• Buying when prices are high
• Selling when prices are low
• Failing to set goals
• Failing to plan to achieve
• Harboring unrealistic expectations
• Allowing emotions to drive decisions
• Not diversifying assets
• Confusing fluctuation with loss
• Starting too late in life

Investments themselves present a variety of risks. All of them, for example, are subject to market risk. That’s because the prices of securities go up and down. Those involving stocks are subject to company risks (negative developments affecting a company’s financial status). There’s also economic risk (the impact of an overall economic slowdown on company profits). Those involving bonds are subject to credit risk, also known as default risk (potential inability of the issuer to pay interest and repay principal). There’s also interest rate risk (rising rates pushing security prices lower).

Related posts:

1. Understand Risks
2. Some Risks and Realities of Investing
3. Indexed Securities: Characteristics and Risks
4. Investing in gold and the truths of the risks
5. Borrowing: What Are Bonds?
6. Develop Strategies to Control Risks
7. What is Risk?
8. Identify reasons for saving
9. Risks to the seller
10. Make Your Decision