Manage Investment Risks
All investments involve some risks. The following are some general risks associated with investing in financial markets.
Economic risk. Unfavorable general economic conditions, such as economic recession, economic slow-down, high inflation, increasing unemployment, could negatively impact company earnings, investor mood and balance of government budget, causing assets price decline, debtor defaults, reduction of dividends, etc.
Market risk. Many factors, such as investor psychology, tax reform, government regulation changes, geopolitical tensions, financial institution failures, natural disasters, could cause investment assets prices fluctuation, in which investors might suffer.
Business risk. When investing in corporate equities, investors are taking partial ownership of businesses. When investing in bonds and other debts, investors are loaning money to businesses. If company’s financial conditions, earnings power, and liquidity deteriorated, company stock price might fall and company might default on its debts.
Interest risk. Rising interest rates make loans more expensive for businesses and investors, negatively influencing business and investing activities. Also, rising interest rates would lower valuations of assets, especially fixed income assets.
Liquidity risk. Securities with low liquidity can have significant changes in market prices, so that investors might not be able to sell these securities at fair value.
Inflation risk. In modern fiat monetary system, inflation is a normal state. If investors’ investment return is not enough to compensate inflation, even investors have no nominal wealth losses, their purchasing powers decline.
Investment returns are earned by investors through bearing some investment risks. InfiniteSpring prefers a conservative investing style, which is to achieve decent and sustainable investment returns while controlling investment risks at reasonable and acceptable level. We believe that continuously compounding money at decent average investment return rates would deliver clients splendid rewards in the long run.
