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Various types of risks in the stock market

Various types of risks in the stock market

Various types of risks in the stock market

2020-04-23 14:21
Generally speaking, investors entering the market may encounter the following types of risks:
1. Systemic risks
The stock market is a "barometer of the national economy." The quality of the macroeconomic situation, the adjustment of fiscal and monetary policies, changes in the political situation, fluctuations in exchange rates, and changes in the relationship between supply and demand of funds will all cause fluctuations in the stock market. For securities investors, this risk cannot be eliminated, and investors cannot maintain securities through diversified investment portfolios. This is the reason for systemic risk. The source of systemic risk is mainly caused by macro factors such as political, economic and social environment. Its composition mainly includes the following four categories:
(1) Policy risk
The government's economic policies and management measures may cause the loss of securities income, which is particularly prominent in emerging stock markets. Changes in economic policies can affect changes in company profits and bond returns; changes in securities trading policies can directly affect the price of securities. And some seemingly irrelevant policy changes, such as policies for private house purchases, may also affect the supply and demand of funds in the securities market. Therefore, the promulgation or adjustment of each economic policy and regulation will have a certain impact on the securities market, and some will even have a great impact, thus causing greater fluctuations in the overall market. A
(2) Interest rate risk
Different financial instruments have different risks and benefits. Even bonds like Treasury bonds with little credit risk are not without investment risks. Suppose, ten years ago, you bought a bond with a face value of 1,000 yuan and an annual interest rate of 10%. Until now, if other bonds pay 12% per annum, you would not be able to sell this bond at a face value of 1,000 yuan. give others. Your selling price will definitely be lower than the face value, making its actual rate of return reach 12%. The risk of bond depreciation due to the uncertainty of future interest rate changes is the interest rate risk of bonds. A
In the securities trading market, the trading price of securities is based on the market price, not on their par value. Changes in market prices are also affected by market interest rates at any time. Generally speaking, when the market interest rate increases, the price of the securities market will fall, and when the market interest rate decreases, the price of the securities market will rise. This trend of reverse changes is particularly prominent in the bond market. A
(3) Purchasing power risk
In real life, everyone will encounter such a problem. Due to rising prices, the same amount of funds may not be able to buy the same goods in the past. This price change leads to uncertainty in the actual purchasing power of funds, called purchasing power risk, or inflation risk. A
Also in the securities market, because the return of investment securities is paid in the form of currency, during the period of inflation, the purchasing power of the currency decreases, that is, the actual return on investment decreases, which will bring losses to investors. A
(4) Market risk
Market risk is the most common and common risk in securities investment activities, which is directly caused by fluctuations in securities prices. Especially in emerging markets, the factors that cause stock market volatility are more complex, price fluctuations are greater, and market risks are also greater. Therefore, blind stock trading is not necessary. A
2. Non-systemic risks
The price of a single stock is closely related to the operating performance and major events of the listed company. Changes in the company's management, financial status, market sales, major investments and other factors will affect the company's stock price trend. This kind of risk mainly affects a certain kind of securities, and there is no direct connection with other securities in the market. Investors can offset this kind of risk by diversifying their investments. This is a non-systemic risk. Non-systemic risks can also be called diversifiable risks, which mainly include the following four categories:
(1) Operating risk
Operation risk mainly refers to the company's sluggish operation, or even failure or failure to cause losses to investors. Changes in the company's operations, production, and investment activities result in changes in the company's profitability, resulting in a reduction or loss of the investor's profit principal. For example, the impact of changes in the economic cycle or business cycle on the company's earnings, the impact of changes in competitors on the company's operations, and the company's own management and decision-making levels may all lead to operational risks. A
There are many factors that affect the company's operating performance. When analyzing the company's operating risks, investors must not only grasp the impact of the macroeconomic environment, but also grasp different industries, different types of ownership, different operating scales, different management styles, and different product characteristics The impact on the company's operating performance. A
(2) Financial risk
Financial risk refers to the risk arising from the company's financing, that is, the risk that the company may lose its solvency. The unreasonable financial structure of a company often creates financial risks for the company. The company's financial risks are mainly manifested as: inability to repay due debts, and interest rate change risk (that is, during the debt period of the company, due to inflation and other effects, the loan interest rate will change and increase. Reduced expected returns), refinancing risk (that is, the company ’s debt operation leads to an increase in the company ’s debt ratio, which correspondingly reduces the company ’s degree of guarantee of creditors ’creditors, thereby limiting the company ’s ability to increase debt financing from other channels). A
The factors that form financial risk mainly include capital-liability ratio, the duration of assets and liabilities, debt structure and other factors. Generally speaking, the higher the company ’s capital-liability ratio, the more unreasonable the debt structure and the greater its financial risk. Investors should pay special attention to the analysis of company financial risks when investing. A
(3) Credit risk
Credit risk, also known as default risk, refers to the possibility that investors will not be able to pay principal and interest to securities holders on time and cause losses to investors. Mainly aimed at bond investment varieties, stocks will only appear when the company goes bankrupt. The direct cause of the default risk is that the company's financial situation is not good, the most serious is the company's bankruptcy. Therefore, regardless of the investment in bonds or stocks, investors must have a detailed understanding of the credit rating of issued bonds and the listed companies that issue stocks. "Knowing each other and knowing oneself can only be effective in battle." A
(4) Moral hazard
Moral risk mainly refers to the moral hazard of managers of listed companies. The shareholders and managers of a listed company are in a principal-agent relationship. Because the goals pursued by managers and shareholders are different, especially when the information on both sides is asymmetric, the actions of managers may cause damage to the interests of shareholders. A
(5) Stock disaster and its characteristics
Stock market disasters are stock market disasters or disasters. When stock market internal conflicts accumulate to a certain degree, due to the influence of a certain accidental factor, the stock price suddenly bursts, which caused huge social and economic turbulence and caused abnormal economic phenomena. Stock market disasters are different from general stock market volatility and also different from general stock market risks. They have the characteristics of suddenness, destructiveness, linkage and uncertainty. The stock market crash has a huge impact on the financial market, and its occurrence is often the beginning of an economic recession. A
Judging from the stock market crashes in foreign securities markets, excessive speculation caused the stock price to skyrocket and a bubble economy emerged, which was an important reason for the stock market crash. The two global stock market crashes in 1929 and 1987 were due to the huge bubbles in the stock market, and eventually the stock price plummeted due to the burst of the bubble, resulting in a stock market disaster. A
3. Transaction process risk
If the above two types of risks cause investors to face changes in stock prices every day, then the complexity of stock investment operations exposes investors to another risk, that is, investors are inadvertent or brokers default. And the risk of being stolen stocks, funds being withdrawn, and deposits being misappropriated. A
For the first two types of risks, investors should learn more about securities market investment knowledge, understand, analyze and study the macroeconomic situation and the operating conditions of listed companies, enhance risk prevention awareness, master risk prevention skills, and improve their ability to resist risks. For the third type of risk, remind you to pay attention to relevant matters, learn to protect yourself, and reduce the risk of the transaction process as much as possible.

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