Risks of investing

Risks of investing

The definition of risk a lot, we try to define by reference to Gitman – Principles of Managerial Finances: Risk is a quantity or size of an uncertainty that illustrates the variance (not varias, variance is the difference in the magnitude of the average value) of the yield an investment ,

Each investment product certainly has potential risks. But there are things that distinguish between risk and risky. The word risk refers to the potential risks of each investment product, while the word risk refers to the people who invest (read: investors). The more a person is able to control the investment risk is diminishing.

Risks of Investing

The following risks are the potential risks of an investment product. There are several types of risks generally inherent in investment products: liquidity risk, investai risk, default risk, credit risk, tax risk, inflation risk, interest risk, currency risk and other risks. Here is a brief explanation:

Liquidity Risk (Marketability or Liquidity)

Have you ever had an investment, (eg call it home) then you experience any difficulty in reselling these investments? Difficulty selling that’s what we can call the liquidity ratio. Scientific definition of Liquidity risk is the risk of investment products that are not easily traded or not sold for resale. According to his theory, the ease of selling inversely with yields and rating (ratings). That is, if you invest in a stock, shares of the company profitable is usually easier to be traded on the stock exchange, compared to the stock of firms that are losing money.

Investment Risk (Investment risk)

Have you ever felt it was investing in a product which he said turned out to be high risk high return yield or returnnya smaller than the deposits? Now that the investment risks. The relationship is more likely investment we get a low yield or loss, it can be said that we risk investments.

Risk of Default / default (default)

Well if this one is definitely in the know, there are several types of gold investments have recently experienced a risk of default. So our investments can not be returned by the provider of investment. The risk of default is the risk caused by the borrower / issuer of investment products which are unable to meet payment obligations in accordance with the promised / agreed in time.

Risks Tax (tax)

Tax risk is closely related with the tax obligations because we invest. Tax structure in Indonesia is still relatively simple, because the number of individual taxpayers (not businesses) which are relatively not much. This makes individual tax planning using investment products in Indonesia can not be done with the maximum.

Inflation risk (inflation)

You’ll already be familiar with the word inflation. For those not familiar with the word inflation can be interpreted as a price increase. Inflation risks due to the potential decline in the real value of the principal investments and investment returns in the future. Inflation will eat away our money, because the ‘flower’ is given by the product of short-term investments (such as deposits) is generally not sufficient to cover the rising cost of living.

Flowers risk (interest rate)

Do you invest in some banking products such as ORI, deposits? For my friends who know or often invest in these products must be familiar with the risk of interest. Interest risk associated with an increase or decrease in interest rates has an impact on the results of our investments. Indonesia’s interest rates are closely related to the interest rate set by Bank Indonesia atai BI rate and the SBI interest rate. Eg when current interest rates in Indonesia has increased, so that interest on savings deposits, time deposits and including interest on the loan increases.

Currency risk (currency)

Do you invest in investment products based on foreign currency or foreign exchange cool? Currency risk is the investment risk associated with the value of another country’s currency in relation to the currency in the country (Indonesia). For example, you invested in foreign currency trading, certainly very vulnerable to currency risk.


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