Certain Risks Associated with Financial Instruments Investments

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Lets Put the Things that are Inaccurate About
Selling Financial Instruments
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• Selling financial instruments are shares, bonds,
  treasury bills, units of investments funds,
  depositary receipts and other financial
  instruments traded on markets of financial
  instruments.
• Selling financial instruments usually provide a
  certain return on investment dividends are paid
  for shares, interest for bonds, in addition,
  the market value of financial instruments may
  increase or decrease.

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• An investor always wants to get a bigger positive
  return however, there is always a risk that the
  return can be negative.
• Generally, the bigger the expected return on
  investment, the higher the assumed risk. In the
  event of an unfavorable market situation, the
  loss on investments in this case can also be
  significant.
• Investments in financial instruments are
  inevitably associated with certain specific risks
  to be considered by investors.

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Inflation risk

• The selling financial instruments risk is
  otherwise known as the risk of reduction in
  purchasing power.
• With inflation, prices of various consumer goods
  and services grow, which reduces the purchasing
  power of money, meaning that fewer goods can be
  purchased for the same amount of money.

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This risk is especially relevant to non-invested
funds or in cases where profitability of a
selected investment is lower than inflation
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Capital risk

• It is a risk that investors will lose all or a
  part of invested funds.
• This risk is directly associated with market
  characteristics of a specific selling financial
  instruments.

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Market risk

• This risk affects the entire capital market, when
  the value of investments may decrease due to
  changes in the following market factors interest
  rate, exchange rate, the country's economic
  situation, price of financial instruments, etc.
• This risk, as well as capital risk, is not
  directly associated with the issuer, it depends
  more on macroeconomic indicators.

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Liquidity risk

• It is a risk of not being able to return invested
  funds without incurring significant losses.
• Having invested funds in illiquid financial
  instruments, it might so happen that they cannot
  be sold at a desired time or they have to be sold
  for a significantly lower price due to weak
  demand or the lack thereof.

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• Interest rate risk
• It is a risk when changes in the market interest
  rate reduce the value of investments in bonds and
  other fixed-income selling financial instruments.
  The overall increase in interest rate has a
  negative impact on fixed-income investments.
• Currency risk
• It is a risk that the return on investments in
  non-local currency financial instruments can
  significantly decrease due to unstable foreign
  exchange rate fluctuations.

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Option risk

• It is a risk that once a reasonable decision to
  invest in a corresponding financial instrument
  turns out to be a bad one over time or no longer
  meets the expectations.

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Investment timing risk

• This risk is associated with improperly selected
  time of investment. It is a risk of reducing the
  return on investment due to improperly selected
  time of investment in selling financial
  instruments.

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