| You should be aware of the main risks | | | | not investing all of your funds into the |
| associated with investing in listed | | | | market at one time.Speculative Risk: If |
| equity securities.Some of these risks | | | | an investment is described as |
| are:Overall market risk: This is the | | | | speculative you should be aware that the |
| risk of loss by reasons of movements in | | | | investment could rise significantly but |
| a market sector. These can be caused by | | | | also fall by the same degree. You should |
| any number of factors including | | | | not invest in speculative investments |
| political, economic, taxation or | | | | unless you understand and accept the |
| legislative. Specific examples include | | | | risks fully and are prepared to accept |
| changes in interest rates, political | | | | any resultant loss.Trading in the stock |
| changes, changes in superannuation laws, | | | | market may involve more risk. Trading is |
| internal crises or natural disasters. | | | | the same as operating a small business. |
| Market risk can be minimised by having a | | | | To survive, you must manage all aspects |
| spread of investments across different | | | | of your business in a manner that |
| types of assets.Global risk: This is the | | | | ensures your long term sustainability. |
| vulnerability of an investment to | | | | Risk management is the most important |
| international events or market factors. | | | | aspect of trading and is often neglected |
| This would include movements in exchange | | | | by many traders. This may account for |
| rates, changes in trade or tariff | | | | the high failure rate of traders.Risk |
| policies and changes in international or | | | | management involves setting rules and |
| bond markets.Sector risk: The risks | | | | guidelines that keep your risk at a |
| associated with an industry's specific | | | | level that you are comfortable with. |
| products or services such as, demand for | | | | Risk in a trading sense refers to the |
| the product or service; commodity | | | | possibility of losing money in the |
| prices; the economic and industry | | | | market place (market exposure). The main |
| cycles; changes in consumption patterns; | | | | variables that affect this liability are |
| lifestyle and technology changes. This | | | | listed below:* Trade position size* Stop |
| may be minimised by detailed research to | | | | loss size* Market tracking abilities* |
| identify quality investments, reviewing | | | | Volatility of sharesIf we are able to |
| their performance and their place in a | | | | control these variables then we can |
| portfolio.Equity specific asset risk: | | | | control risk. This should always be one |
| Risks associated with the specific | | | | of your principal considerations when |
| investment, for example, quality of the | | | | developing any trading system.Jon Lynch |
| company's directors; the strength of | | | | is Marketing Manager of the Capital |
| management and key personnel; | | | | Intelligence Group of companies, |
| profitability and asset base; debt level | | | | including HomeTrader - Australia's |
| and fixed-cost structure; litigation; | | | | leading stock market education centres. |
| competition levels; liquidity of the | | | | We focus on teaching you how to create |
| investment.Timing Risk: The possibility | | | | wealth through the share/stock market |
| that you enter the market at a bad time | | | | using a customised trading plan or |
| - for example, just before a fall in the | | | | system that is right for you, your |
| share market. This can be minimised by | | | | situation and your goals. |