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FP Article 15.2 (To sign up for a FREE 16-lesson eCourse on Investment Risk, please click here.)

Investment Risk - Company Risk

by Rajen Devadason

Business will be better or worse.

Calvin Coolidge

  The richest people in the world, titans of industry like Bill Gates and Warren Buffett, have grown rich through the success of their companies.

For regular retail investors, the best way to gain access to such investment opportunities is, predictably, to purchase partial ownership of great companies.

If you do the same, and get it right, you could end up very rich. But the failure rate of private companies is very high. What about public listed ones?








The failure rate of such listed business entities is a lot lower. But... it can still happen.

This means we need to be careful when buying (or buying into) companies. You've probably heard many times that in the long run equities offer the best returns. That is correct. But there is a risk. 

This is an article explaining company risk. I hope you enjoy reading it. But if it isn't what you're looking for, you're welcome to search for something that better meets your needs. Thank you for allowing me to serve you.

Rajen Devadason

Web www.FreeCoolArticles.com










That risk is completely understandable. Capitalism thrives through a process of creative destruction - a constant churning of business transactions generated by a plethora of business decisions... some great, some so-so, some lousy!

This, then, is the bottomline: Equities offer the best long-term returns of all investment classes but there is a price that must be paid by those who wish to play in the richest game on the planet.

The price is simply that business owners have perpetually faced - and will always continue to face - unique challenges to the viability of their companies.

Company risk, therefore, refers to the chance that a problem specific only to a particular company that you have invested in will deeply injure its economic attractiveness.

Because such events are by definition restricted only to the company we're talking about, the best way to deal with specific company risk is to diversify your ownership of equities into pooled investments. You do so by adding carefully selected equity mutual funds or equity unit trust funds to your portfolio.

If you'd like to continue to learn more about other types of investment risk, here's additional information for you...

15 Types of Investment Risk (OR, to sign up for a FREE 16-lesson eCourse on Investment Risk, please click here.)

1. Borrowing Risk

2. Company Risk

3. Credit Risk

4. Currency Risk

5. Diversification Risk

6. Industry Risk

7. Inflation Risk

8. Interest Rate Risk

9. Liquidity Risk

10. Lost Opportunity Risk

11. Manager's Risk

12. Market Risk

13. Market Timing Risk

14. Political Risk

15. Prepayment Risk



© Rajen Devadason

Web www.FreeCoolArticles.com






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