what is the risk in equity investments?

Answer 1

Risk in equity investments like in two places: capital value and volatility.

Capital value. Stocks can go up and they can go down. The direction of a stock is influenced by the fundamentals of the company, investor sentiment and other factors. Capital value is also affected by liquidity. A public stock that is highly liquid can be sold without further pushing down the price, while an illiquid investment may take time and money to exit.

Volatility. By definition, financial risk equals volatility. Investors demand higher returns for higher risk/volatility. If you gave your financial advisor $100 and he made $5 in government bonds over 1 year, you'd be happy because that's what your supposed to make (5% return for no volatility when held to maturity). If he made 5% in the stock market, you'd be less than pleased because you generally demand a higher return on the stock market. If he went to Vegas and he gambled your money on slots, you wouldn't be pleased that he beat the odds by bringing home positive return - you'd be furious because of the risk he took.

Answer 2

Equity or shares is the core capital of a company. This is never repaid during the lifetime of the company to the investors by the company. Hence an investor usually has to rely on either selling this off in secondary markets commonly known as stock exchange or transfer and sell outside the stock exchanges just like any other property. This creates a problem as the exchange value for the shares. If these are listed on exchange values are readily available if not then one has to determine it through other means. Dividend paid by company is income source but that is less compared to the market values of shares. Thus an investor has to rely on market values listed in exchanges for liquidating equity. These market values depend upon economic performance and company performance in long term and on market movements and credit policies among others in short term.

Therefore risk in equity is high, but coextensively returns are also highest.

Answer 3

Very little with blue chip stocks, A great deal with equity investing such as venture capital. The risk is usually tied to the anticipated gain. Big gain, big risk. While the term is generally applied to the stock market, the big money is gained and lost in areas outside of stocks: Venture capital, futures, real estate, etc. Think outside the DOW!

Answer 4

100 % risk.

Stocks drop sometimes. Some stocks, particularly "penny" or OTC stocks, can go to $0.00. Actually, 80% of stocks $5.00 and under go to naught in 5 years or less.

Answer 5

the investment is subject to market risks; u may or may not make a profit ----- u could make a loss!

Answer 6

market is at boom... so when market comes down you might even lose your invested money also...