Risk and returns are integral part of investing .The return that an investment
generates cannot be seen in an isolation from the risk .High return can be
earned only if investor is willing to take higher risk.
Various types of risks on an investment
1 ) Inflation risk : The risk that money received on an investment may be worth less than adjusted for inflation
2) Interest rate risk : The risk that bond prices will fall in resposnse to rising interest rates and vice-versa.
3) Credit risk : Risk that issuer of securities will not be able to make expected interest and principal repayment.
4) Market risk : Risk of loss of value of investment due to adverse price movements in an asset in the market
5) Liquidity risk :Risk that investor may not be able to sell his investment when desired or there is high transaction cost.
6) Business risk :Risk caused by factors that affects operations of a company which can change its fundamentals
7) Political risk : Risk associated with unfavourable government actions.
8) Country risk : Risk related to country defaulting on its financial commitments which can affect performance of all other securities.
