1: risk definition
2: how risk works
3: risk vs loss
4: example of risk
Opening information:
Risk means possibility of the exposure to danger or problems, the danger or problems would be not born, they must be created.
Which means it would be created by using or doing some amount of nonmanageable activities or works. Therefore risk is not an object.
So now let’s have a look at what is a risk, how risk works in the stock market for all Corporate industries and investors, and what is the difference between risk and loss, finally one clear example of risk.
1: risk definition
Mr. Jampan asked Mr. Karoli for 10,000 dollars from a lender, but then Karoli avoided the lender, not because Jampan didn’t have a status or capacity, but because Jampan didn’t have any income with unemployed.
This creates the chance of danger for the karoli with losing of providing lend to jampan.
On the one hand, Malk is a businessman who asked for a loan from the bank, but the bank nearly avoided and rejected to provide the loan.
Not because Malk didn’t have a stable income, but for the reason of Malk’s business didn’t have the required income to pay for the loan, he would request from the bank.
Even If a Bank provided the loan to the Malk, they had a high chance that the loan couldn’t be paid on by the Malk business, this leads to danger anyway.
On the other hand, Jackie proposes love to Makki, but Makki rejects it, not because Jackee is ugly or not a smart guy, but because she has a very big goal. Loving a Jackee and committing to him, made the Makki unable to focus on a goal and had a high chance it would lead to family problems too.
Here chance of all the problems and dangers is called a risk, the risk is not made anywhere, but it is created by us. So now let’s see how the risk works in the stock market for all Corporate industries.
2: how risk works
Any business when gone publicly traded company had a risk of selling shares fully or completely on the initial public offering.
On the one side, initial Investors had a risk of purchasing the newly issued shares, because it has a high chance that certain new shares would go down in price.
On the other side, investment banks act as middlepersons for all public Companies as dealers, being dealers creates a risk of not selling shares, which leads to loss of deals and works.
Once the initial public offering process went well, then the business had a risk of paying consistent fees for the stock exchange.
Where the Corporation also had a risk of maintaining the company reputation, Company reputation means not a just reputation, but a stable income from the business.
A decrease in a business’s reputation leads to a decrease in the share price of stock in the public market.
Stock Investors had a risk of danger in buying and selling shares of stock, not in exchange of shares between the Investor, but on decrease and increase on the price of certain shares.
Moreover, public Investors have a risk of problems even holding stocks because there is no guarantee that certain stocks will fall or rise rapidly anytime.
This kind of rise and fall created sometimes losses and sometimes profits for the majority of the stock Investor, these bring nerves and anxiety among all traders.
Most people’s confuse about the risk and loss, so now let’s dive into the key difference between them.
3: risk vs loss
The difference between risk and loss is, that risk means the creation and identification of danger in something, and the risk might lead to danger or not a danger.
Loss is not an identification of danger in some matter, instead, it’s had a drop or go of something, it won’t be got back.
So the key difference between the loss and risk is a risk became part of the loss. Where loss is an experience to creates a danger, which danger leads to a risk.
To make you more clear about risk, let’s jump into one example.
4: example of risk
Say Hipu had 45,000 dollars on his hand in investing in two different stocks, one is stock McDonald’s and the other one is Apple.
Hipu thinks each share do well in the future, but Hipu has already lost 70,000 dollars in the past years because of a wrong investment made in the wrong-grown company, hipu last time invested based on chart analysis alone.
Now he looking at industry growth, and not relying on chart analysis, but also has a fear of experience that he would lose if he didn’t make the right Investment with the right price.
Here the hipu experience is a loss experience and fear is the possibility of risk in it.
Non-Market rule: #100168
Risk is not a market rule, because risk comes from the action that investors or traders take towards any securities market to increase the investor’s wealth, so any action you take is completely responsible from your side, you couldn’t raise any complaint.
If your investor and not comply or align investing based on market rules please learn about how to regulate your investments under your control with the use of Rule investing.