Market Risk

Market risk also known by some as systematic risk is when there is potential for an investor to lose the value of its factors or experience a decline in them due to the volatility of the market that is for example by the structural changes that occur in the market or the economy as whole.

Market risk can be subdivided into four different divisions. First one is the Equity Risk; the equity risk refers to the depreciations in the stock market for your investment which in time can cause you to lose huge sums of money. Another form of market risk is the Currency risk, this is crucial when you are dealing in foreign currency across your national border, it is when the price of one currency changes against the other in an unfavorable position for you thus causing you to gain, lose money in the form of decreased worth of your investment. The third form of market risk is called the Interest rate risk, it is for those who have assets that are interest bearing with the rise in interest rates the value of their assets will automatically fall. The last type of market risk is the commodity risk where there is a potential risk that the price of an input factor may increase which will affect the investor adversely, these can be technological, seasonal, political etc.

A simple way to minimize your market risk is by the act of diversification. That spreads your risk. You can allocate your resources in different sectors to avoid the risk of losing it all at once. It is advised to keep a diverse product portfolio and not saturate in on one product or investment, this will ensure that one losing end might be offset by the increasing gains from another. So play it smart before the market risk actually hits you in the face, because no one wants to lose the worth of their hard earned investment.