Editing 1course Stock Market (section)

== Types of Investment Risks ==

=== 1. Market Risk ===
'''Market risk''' refers to the potential for an investment to lose value due to overall market declines. This risk is inherent to all securities and cannot be eliminated through diversification.

=== Example: During a market crash, the value of most stocks declines regardless of the individual performance of the companies. ===

=== 2. Credit Risk ===
'''Credit risk''' is the possibility that a bond issuer will default on its payments, leading to a loss of principal and interest for the bondholder.

=== Example: Investing in a corporate bond from a company with poor financial health increases the risk of default, meaning the company might fail to make interest payments or repay the principal. ===

=== 3. Liquidity Risk ===
'''Liquidity risk''' is the risk that you won’t be able to buy or sell an investment quickly without significantly affecting its price.

=== Example: Owning shares in a small-cap company with low trading volume might make it difficult to sell your shares quickly without impacting the stock price. ===

=== 4. Inflation Risk ===
'''Inflation risk''' is the danger that inflation will erode the purchasing power of your returns, making them worth less in real terms.

=== Example: If you hold a bond paying 2% interest while inflation is 3%, your real return is negative because the purchasing power of your interest payments is declining. ===

=== 5. Interest Rate Risk ===
'''Interest rate risk''' is the risk that changes in interest rates will affect the value of your investments, particularly bonds.

=== Example: When interest rates rise, existing bonds with lower rates become less attractive, causing their prices to drop. ===

=== 6. Political and Economic Risk ===
'''Political and economic risk''' involves the impact of political events, economic policies, or regulatory changes on your investments.

=== Example: Changes in government policies, such as new regulations on a particular industry, can negatively affect related stocks. ===