- Market risk
- Inflation risk, also known as purchasing power risk
- Interest rate risk
Contrastingly, unsystematic risks are the ones that don’t affect the entire market but rather a specific asset, the industry, or the person or entity that owns that product or service. Unlike systematic events, they’re diversifiable and can be both internal and external. These are some examples:
- Liquidity risk
- Business risk
- Financial risk
While some products are riskier than others, all the assets you can think of can lose value at some point. Also, there’s no way to avoid or predict these risks.
Even if you have extensive investment experience, this is simply impossible. That’s why it’s so important to learn about the events that can affect your assets and educate yourself on how to handle these situations if they occur.
This is where investment education comes in. It won’t mitigate these risks or guarantee that you’ll achieve the expected results. However, learning about this topic will allow you to balance your choices with their possible consequences to hopefully improve your decision-making skills.