Risks associated with direct investment

[Knowlopedia]

Below are risks associated with direct investment in stocks.
1) Market risk: In the market, a stock's value can rise and fall over time.
2) Liquidity risk: A stock that's hard to sell at a fair price may be very valuable one day but worth nothing the next.
3) Credit risk: If you borrow money from your broker to buy stocks, then it may be difficult to pay back the loan if the company doesn't make enough money or goes bankrupt. Your investments might have value only in case of bankruptcy or liquidation of the company itself; you wouldn't receive any cash from it.
4) Dividend risk: If the company pays a dividend, then you can get a cash
payment from the company, but you can't get any dividends in the future. If the company doesn't pay a dividend, you'll never have any cash payments from it.
5) Tax risk: You have to pay taxes on your investments when they're sold or when they're converted into cash. The year to year tax rate may be different for every investment.
6) Market efficiency risk: When stock prices go up, they may not go up because of superior management and good news about the company; it's possible that buying and selling stock will just create more uncertainty in the market.

 

[Learners Quest]

Risk such as volatility, liquidity, and management are associated with direct investment.

The risks are as follows:

• Volatility: investments in direct may be influenced by market volatility. Investments with high levels of volatility could lead to larger losses than planned or higher capital gains than expected.
• Liquidity: investments that offer less liquidity pose the risk of not being able to sell assets quickly when needed. This means limitations on short-term cash flow and reduced potential for timely asset growth as well as a decreased ability to react to unexpected events.
• Management: investors should do their research before investing in any company, even those that are public companies with publicly traded stocks (stocks can still go down).