The most common investment risks and threats that elderly people should always escape

The most common investment risks and threats that elderly people should always escape

Gains from an investment is nothing but a financial valuation of the extent of risk that you can escape. It is obvious that investments would come with its risks and threats, and if you aspire to taste investment success, you need to escape these risks. Hence, knowledge on the most common type of investment risks become very important.

Risks related to the interest rate

This threat can be seen from 2 different perspectives. As an elderly individual, obviously, you are expected to invest more in Fixed deposit as it can produce a decent income, without exposing you at high risk.  However, if the bank reduced the rate of interest, your income from such investments will fall considerably. On the other hand, so far bonds are concerned, if the rate of interest enhances, the market value of such investment will drop, and you will be forced to accept a significant loss.

Currency risks

This sort of risk factor is faced by the investors, investing in FOREX. Though, Currency market is highly stable, still, the value of currency is likely to change. So, in such instances, you will have to incur a loss. This is one of the market related risk factor that emerges as the main threat for FOREX traders.

Liquidity risk

Another very common investment risk that elderly investors should always escape is that of the liquidity risk. In simple terms, this is an instance, when you are unable to liquidate your investment and you miss the opportunity to incur some significant investment gains. Hence, before you invest in any investment instrument, you should always consider the liquidity aspect. Always keep a part of your investment portfolio stuffed with assets that can be liquidated very easily. Forex and gold are the instruments that best fit to this point.

Credit Risk

If you have majorly invested in bonds, and the company that issues that bond gets to a financial position, wherein it is unable to pay the interest, or fails to pay back your principal amount, you are going to incur this risk. Hence, before investing in bonds, check the extent of credit risk it involves.   Another major threat is likely to come up, when you opt for unnecessary concentration on any one kind of investment option. In case that instrument under performs than what expected you will end up incurring a significant loss that will be impossible for you to recover as an senior individual.