Posts Tagged ‘Investments’

Common Risks in Investments

July 7, 2015

In 2008, Pablo Soria de Lachica accepted the role of director of business development at BForex, a currency trading firm. Prior to joining BForex, Pablo Soria de Lachicha studied market research and market analysis at Universidad Tecnologica de Mexico, graduating with a master of business administration.

Investments often fall into one of four risk categories: market, default, inflation, or mortality. Market risk is perhaps the most common type of risk, as well as the broadest category. Stocks, investments in single companies, and bonds are just a few products that depend on the health of the market. Should the market crash, the investment’s performance could plummet. Investments also follow market trends, which can trigger beneficial or adverse results.

Default risk concerns the quality of an underlying investment, such as a single company’s bond. Investors profit alongside the company, but if the company defaults, the investment likely will fail to produce a return.

Inflation risk has to do with the average rise of inflation. Financial planners assume 3 percent to 4 percent inflation per year over extended periods. Should inflation risk be any higher, investors can expect low returns on investments.

Any investments that only pay out while the investor is alive may not pay out enough to support the investor and balance out fees and premiums, making them mortality risks. Investors should stagger short- and long-term investments to juggle expenses while working and to support themselves during retirement.

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