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Stock Investment Risk Articles

Investors Beware of Government Impersonators

Investors need to beware of a type of investment scam that involves impersonators of government officials.

Options on Securing Your Securities

What are the main ways by which an investor can hold his securities? What are the pros and cons of each option depending on the investment instrument?

Investor Alert: How to Avoid Investment Fraud

Whether you are a beginning or a veteran investor, you should take all the necessary steps to protect yourself from investment fraud. Read our tips on avoiding investment scams.

What Happens When a Public Company Goes Private

When a public company goes private, it is subject to less rigorous reporting requirements and its shareholders may find it harder to keep track of their investments or may be unable to sell their shares in the public marketplaces.

What Are Promissory Notes and How to Avoid Promissory Note Fraud

Promissory notes are legitimate investment instruments but since there has been a recent rash of promissory note fraud targeting individual investors, be careful when making a promissory note investment and learn more about these instruments.

Implications of Bankruptcy to Investors

What happens to investors when a public company files for corporate bankruptcy (i.e. goes bankrupt) is a pressing concern among investors, especially in light of an economic recession and stock market crash.

Types of Corporate Bankruptcy

Investors should learn to distinguish between the two types of corporate bankruptcy: Chapter 11 Bankruptcy and Chapter 7 Bankruptcy.

Financial Analysts: Potential Sources of Bias

Financial analysts (a.k.a. research analysts, securities analysts, equities analysts) are subject to social pressures, same as everyone else and may not always be truthful or fair.

Bond Funds Safety

A common misconception among many investors is that bond funds present little or no risk. However, bond funds are also subject to a number of investment risks.

Bank Demutualization - Frauds to Watch Out For

The following article will introduce you to the most common fraud schemes depositors may encounter during a bank demutualization process and will give you some tips and advices on how to avoid them.

Filing for Chapter 11 Bankruptcy

A bankrupt company may turn to Chapter 11 of the Bankruptcy Code in order to start “reorganizing” its business and make an effort to become profitable again. This article will help you learn more about Chapter 11 bankruptcy.

Chapter 7 Bankruptcy

When the bankrupt company uses Chapter 7, it stops operating and goes completely out of business. This article will try to get you familiar with corporate bankruptcy under chapter 7.

Lost or Stolen Stock Certificate?

Whether you have lost your stock certificate or it has been stolen, you should act promptly to replace your physical certificate in order to prevent any frauds and misuses.

Understanding Margin Calls

If your account falls below your brokerage firm’s maintenance requirement (maintenance margin) the firm will generally issue a margin call.

Day Trading Profit and Risks

Because of the possible both high profits and losses, day traders are often referred to as gamblers (and sometimes bandits) by other investors.

Short Selling Risk

As simple as the concept of selling stocks short may sound, short selling has its risks and you should be aware of them.

Risks of After-Hours Trading

After-hours trading does provide investing opportunities, but there are also many risks and complications involved. Here we list some of them.

Government Bailout Plans

There is a lot of criticism against the recent unprecedented intervention in the financial markets by the government. Yet, many argue that government bailout plans are needed in order to avoid consequences worse than the Great Depression.

The Credit Crisis (Credit Crunch)

When did the subprime mortgage crisis turned into a credit crisis and how did this happen? What are the consequences of the credit crunch?

The Subprime Mortgage Crisis Explained

The so called subprime mortgage crisis - the crisis that brought the global financial system down - when, how and why did it happen?

Investment Opportunities in Times of Financial Crisis

The financial marketplace is now marked with extreme volatility and many investors run away from the stock market. And yet, when real estate and stock markets are going down, this is still equal to both crisis and opportunity.

What Caused the Current Financial Crisis?

This article will try to explain the original causes of the current US financial crisis (probably the biggest after the Great Depression) and its effect on the world economy.

Stock Market Risk Premium

Risk premiums are a suitable yardstick for judging the worthiness of investing your money in particular stocks. In order to achieve better results on the stock market you should harmonize the level of risk with the rewards you expect to get from the particular stock.

Stock Valuation Failures

Most investors start to celebrate when the conditions of a bull market are observed. However, the history is full of examples when bull markets have not been so beneficial and the risk of stock valuation failure exists.

Stock Price Volatility

Stock prices are characterized by volatility. When significant changes occur, investors tend to panic.

Effects of Inflation on Your Investment Portfolio

Inflation represents one of the major threats to stock investors. When the inflation rates rise, investors get nervous in expectation of the potentially negative consequences.

Small Cap Stocks Opportunities and Risks

Small cap stocks can be both extremely beneficial in financial terms and disastrous to your hard earned money. Even though small cap stocks carry a great degree of risk, you might consider investing in them.

Time, Risk and Investment Goals

When you begin stock investing you should clearly determine your goals for doing so. However, you should expect that your goals and the risk you are willing to take change over time because your way of life changes as well.

Stock Portfolio Balance Maintenance Techniques

When you establish your investment portfolio you should balance it among the different asset classes. If you fail to do so you may expose yourself to higher levels of risk.

Strategies to Deal with a Down Market

During a down market many investors transfer their stocks into cash and wait until the market starts to move up again. Despite the fact that this strategy sounds as a good movement on the part of investors, it hides its risks.

Stock Market Crash Prevention Measures

The history of the stock market is marked with many crashes. In order to avoid such crashes in the future, several limits were implemented.

Inverted Yield Curve Implications

An inverted yield curve results when short-term interest rates are higher than long-term interest rates.

The Importance of Portfolio Rebalance

In the course of investing the portfolio may go out of balance. If a significant change in your asset proportions has occurred take immediate actions in order not to expose yourself to higher level of risk than you can face.

Market Timing Hidden Traps

Timing the market can be dangerous for investors that are making their first steps in the stock market. Many opponents of market timing claim that accurate prediction of market movements is very risky and in itself represents a form of gambling.

Longevity Risk and Retirement Plans

There are many types of risk with which investors should deal with, such as inflation, economic, market risk and etc. One of them can threaten your retirement plan and it is called longevity risk.

High Risk, High Return

Many investors purchase a particular stock with the intention of making a big profit over a short period of time. However, this action is not investing, but a pure gambling and you are never guaranteed that you will get the high returns you hope for over such a short period of time.

Stock Portfolio Diversification

Diversification is one of the key components of a successful investment portfolio. Through diversifying your stocks you decrease to a great extent the risk of losing your money.

Regulatory Bodies of the Securities Industry

The stock market is guarded from the complicated con schemes by a complex regulatory system. You should know whom to address if you feel that a company or a broker is having an unethical behavior.

Beta Ratio Basics

In order to measure the volatility of the price of a stock relative to the rest of the market and to determine the level of risk a particular stock carries you should apply the Beta ratio.

Stock Valuations - Key Interest Rates Relationship

The valuation of a stock, and particularly its risk-free rate, is directly related to the key interest rates that the Fed adjusts at its meetings. This relationship illustrates the potential expectations regarding the investment in a particular stock.

Operating Cash Flow Implications

When deciding on the investment in a particular company you should not overlook a company’s cash flow. Investing in a company with a negative OCF may be a risky enterprise.

Assessment of Risk Tolerance

Before embarking on investing activities you should establish a risk zone within which you feel comfortable. Once you have done this you should observe your risk tolerance in order not to undertake trades that are above your risk tolerance level.

Investment Risk Tolerance Level

When deciding on the investment in a particular stock you should weigh whether the risk is worth the reward you will gain. In order to make investment choices that fit your financial goals you should first establish your risk tolerance and conform the investment decisions you make to it.

Investment Risk Types and Advices

Stock investing and risk go hand in hand. You have control over certain types of risk, whereas others are beyond your control. Thus, when you establish your investment portfolio it is extremely important to make a clear view of your risk tolerance level.