Unraveling the Mystery of Investing #6

Market Risk

Market risk is the risk associated with market fluctuations that can depress the value of particular investments. All stocks and bonds can be affected by downturns caused by fraud, war, or calamity. Additionally, certain types of investments can experience a major downturn should there be a slowdown in a specific industry or category of investments. Factors such as political developments, market cycles, changing investor sentiments or reaction to previous excessive rises or declines can all contribute to market volatility. Higher interest rates hurt stocks because they can slow the economy, which can crimp a company’s revenue. They boost corporate borrowing costs and make stocks less attractive relative to interest-paying investments.

Content © Rich Brott, 2011

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