Unraveling the Mystery of Investing #4

Economic Risk


Economic risk can surface due to the fact that slow economic growth will be too weak to sustain or improve the return on a particular investment. For example, the price of shares in growth companies that require a strong economy to sustain earnings may fall during an economic slowdown. Again, as in the case of liquidity risk, you would not want to invest any dollars required for education or other short-term needs into an investment that would have a substantial economic risk attached to it.


Content © Rich Brott, 2011

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