Investment Dealer Risks

There are three types of risk that need to be evaluated by any person who wishes to determine if the risk is worth your money. The first one is business risk.This type of risk is relatively popular, so almost all the public knows about it.

All companies have different levels of competition. It can be direct, or indirect, but at the end, they are trying to grab a piece of the scarce resources that are available in the market. For example, a gourmet restaurant has to offer enough value to compete with a car dealer. Why? Because someone who buys a car may have to adjust a bit in order to pay for it. That means that certain luxuries, like a dinner at a fine restaurant, will be sacrificed.

But competition isn't the only variable that affects business investment risks. There are also the events that happen around the world. Due to the terrorist attacks of September 11, many of the domestic airlines lost enormous amounts of money that. Another variable is the economic measures taken by the governments. If a government decides to increase taxes, the solvency of the company will be compromised.

After business risk, comes valuation risk. This isn't widely known among the public, but it is considered of great importance among investors. Why? Because by valuating the company and it's operation, you will be able to determine if it is worth the time. One example is Google. The company is great, just bought YouTube and has interesting numbers. But the share is way beyond what it should really cost.

In this type of cases, you may be facing a complicated decision. Will the stock raise even more or may it fall down after the bubble blows up? The only way to do it is to valuate the company and determine if it is really a good investment.

The third type of risk is the force of sales risk. It means that you may own a great stock, but, when are you going to be able to sell it? Will you have to wait ten years until you can see your money back? What if you need that money for the college of your kids or for treating a disease? As you can see, the disposition of your money is as important as the value of the company and the variables that affect it.

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