Investing can be the most invigorating as well as frustrating experiences in life. In Wall Street you hear the often repeated saying, ?Sell them and you'll be sorry, Buy them and you'll regret, Hold them and you'll worry, Do nothing and you'll fret.? You have to secure your position in-between these four options.



In share market, you need to get wise to get wealthy. Most of the financial writers and brokers give high promises to investors, but the market obliges the select few. The sure road to success is to avoid the path of failure. Before taking a decision to invest, try to know what could be the pitfalls?

Some of the investment risks are:

Conservative approach: If your savings do not keep up with the rate of inflation, savings mean nothing.

Aggression: Thoughtless aggressive approach will damage your portfolio.

Timings: Overconfidence that one will be able to time the market lands one in trouble.

Broker: Selection of the wrong consultancy service. In this fierce competitive era, one needs to develop a superb strategy to produce top-tier results.

Business Risk: This is the most familiar issue. It relates to loss of value through mismanagement, competition and financial insolvency.

Valuation Risk: An investor needs to pose a question to him before affecting the purchase. Is this share worth at this price? To consider purchasing the share at the high price, assurance about the future growth prospectus needs to absolutely certain. There are always other shares in the market with lesser risks.

Economic Risks: If the economy as a whole goes bad, no one can help. A combination of factors, political and other serious unfortunate happenings can contribute to this. When the domestic market is in trouble, foreign shares can do well. With the advantage of globalization, majority of the US companies earn a good percentage of their profits overseas.

Inflation: Inflation is the undeclared tax on everyone. The cure of higher rate of interest to beat the effects of inflation is suggested. But the remedy is worst than the disease. Inflation destroys value and creates recessions. Those with fixed income are badly hurt as it erodes the value of the income

Market Risk: When the bear market is up to corrections, it inflicts harm to many investors who lock their losses. When the stocks do poorly for more than a decade, the resultant loss can never be made up.

Interest-Rate Risk: Those with long-term portfolios are affected directly. If the interest rates rise significantly, money is shifted from share market to other avenues which promise more returns.

Currency Risk: Fluctuating exchange rates are of concern to single-country investors. If you hold funds for a short period, and something untoward happens, you will face the devastating situation. To counter this, fund managers try to hedge their portfolios, with currency futures and forward contracts. But a hedge costs money. You need to have well-diversified international funds to counter this risk.

Asset-Class Risk: In the present market conditions, an investor's primary emphasis is shares. Shares, bonds and cash are the three major asset classes. This class of risk occurs when you allocate a disproportionate amount to any of these categories or totally ignore one or two of them. It is in the interest of the investor to diversify.

Sector Risk: Some investors deliberately keep their portfolios tied down to narrowly focused sectors. These could be utility stocks or pharmaceutical companies. Those making big sector bets also fall into this category.

Country Risk: Those targeting developing markets by doing single country investments will be badly affected if political and economic instability occurs in that country.

Tax-Rate Risk: Tax laws can make one's investment less remunerative for no fault of the investor. All of a sudden the holdings become less valuable.

Knowledge of risks is essential but an investor need not stop doing investments, having acquired this knowledge. Do your homework well, and take calculated risks. That is the only way to prosperity in the share market. Keep the risks at the acceptable level. The best bet against risks is availing the services of a good consultancy.