Investment is the core part of every business. There are no businesses in the world that can run without investments. Investment not only helps the industries to run their business but also allows investors to save some money and make it grow in a productive way. In the capitalist economy that prevails today government is encouraging people to invest more and more in the capital market.
If you are a new investor then let me tell you that investment may be quite profitable for you but there are some Basic Risks in Capital Investment that you need to be careful of.
Today, market is quite volatile and you never know if we are heading for a new recession. In this scenario you should consider the risks of investing before actually going for it. Risks due to Economic Business Cycles are one such risk which is their due to the fact that no industry is secured today. You may not know but any industry may suffer a downfall in near future which is not known but you right now. There is always a risk that the economy will face a downtime and the need of the product manufactured by the company will be curbed.
In such case the price of the investment made by you will reduce and you will get a lower price when you sell the shares or the portion that you hold. Because of the decreased need the industry itself may face problem. It can again happen that there is a new product launched in the market which has made your product out of use. It may take your company time to give them a competition. This is lower point in the curve of company’s business cycle that every company goes through.
You just don’t know that it is approaching to the company that you have invested in. economic business cycle is something that cant be avoided but as you don’t have the prior knowledge you should calculate a portion of risk because of this.