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Investing In Stocks

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Management
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Southern New Hampshire University
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Running Head: INVESTING IN STOCKS 1
Investing in Stocks
Student’s Name
Institutional Affiliation

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INVESTING IN STOCKS 2
Investing in Stocks
1. Investment risk: Explain key risks associated with investing in stocks.
Stock investments involve specific strategies used in laying out money to receive greater
benefits in the future. However, like any other business, it has its risks. For instance, the market,
inflation, and liquidity risks are key risks associated with stock investment. Market risk involves
a company's decline in value due to various factors that range from global competition and
economic changes in the world. Stock market crashes and bubbles are examples of market risks
that affect the financial performance of an organization. The risk is inevitable and cannot be
controlled, but one can hedge against the market risk. Inflation risks are affected by the changes
in purchasing power control. It involves the loss of value in investment in that its future worth
may not be the same as it is today. The risk of inflation continues to increase as the government
continues to borrow funds to facilitate the stimulus packages. However, companies are able to
adjust the prices of stocks to inflation rates, thus making stocks the best form of protection
against inflation. Liquidity risk involves an investment's marketability and how fast it can be sold
or bought to meet debt obligations. For instance, a company may be unable to meet a financial
obligation as they are unable to convert their assets into cash without incurring a loss (Apergis,
2015). Therefore, the investors risk losing some of the money invested into the company.
2. Investment returns: Discuss events that can cause the price of a stock to increase or
decrease.
It is evident that stock markets are volatile and influenced by several events that lead up
to their decrease or increase. Events such as the impact of world events can influence stock
markets. For instance, stocks have been very volatile with the ongoing pandemic as most

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Running Head: INVESTING IN STOCKS Investing in Stocks Student’s Name Institutional Affiliation 1 2 INVESTING IN STOCKS Investing in Stocks 1. Investment risk: Explain key risks associated with investing in stocks. Stock investments involve specific strategies used in laying out money to receive greater benefits in the future. However, like any other business, it has its risks. For instance, the market, inflation, and liquidity risks are key risks associated with stock investment. Market risk involves a company's decline in value due to various factors that range from global competition and economic changes in the world. Stock market crashes and bubbles are examples of market risks that affect the financial performance of an organization. The risk is inevitable and cannot be controlled, but one can hedge against the market risk. Inflation risks are affected by the changes in purchasing power control. It involves the loss of value in investment in that its future worth may not be the same as it is today. The risk of inflation continues to increase as the government continues to borrow funds to facilitate the stimulus packages. However, companies are able to adjust the prices of stocks to inflation rates, thus making stocks the best form of protection against inflation. Liquidity risk involves an investment's marketability and how fast it can be sold or bought to meet debt obligations. For instance, a company may be unable to meet a financial obligation as they are unabl ...
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