Risks Associated with Investment Products

In this section

• Market Risk
  Review broad market risk and how diversification can reduce unsystematic exposure.
• Credit Risk
  Understand default risk, downgrades, and credit-spread sensitivity.
• Interest Rate Risk
  Study how rate changes affect bond prices, duration, and fixed-income holdings.
• Inflation Risk
  Review purchasing-power risk and which products are most exposed to inflation.
• Liquidity Risk
  Understand how thin trading and limited buyers can affect price and execution.
• Currency Risk
  Study exchange-rate risk in foreign securities and international investments.
• Political and Legislative Risk
  Review how policy changes and political events can affect securities values.
• Reinvestment Risk
  Understand the risk of reinvesting cash flows at lower yields.
• Prepayment and Extension Risk
  Study cash-flow timing risk in mortgage-backed and similar products.
• Concentration Risk
  Review how overexposure to one issuer, sector, or asset class increases portfolio risk.