It is well-known that investments come with risks. Risk is a deviation from the expected outcome of the investment, which may result in not achieving investment targets. Any investor should evaluate and understand risks before making an investment, because it is very important in measuring future results.
Whereas traditional bank deposits are not often subject to various risks, investments on the contrary have tendency for both positive and negative outcome that can sometimes lead to loss of original assets. No one can ever guarantee the total value of investment, including primary assets and returns, since they can drastically change over time or because of certain circumstances. An investor should not rely on historical performance of certain investments, since their similar performance in the future cannot be guaranteed.
Each investor should clearly understand that all possible losses and risks, related to the investment, are carried by the investor solely. That is why it is very important to evaluate all potential risks connected with an investment to decide whether you can tolerate it. To help with the risk evaluation process, there are professional investment advisors as well as portfolio
Market risk is the possibility of an investor experiencing losses due to factors that affect the overall performance of the financial markets in which he or she is involved. It is also known as a systematic risk. Sources of market risk include recessions, political turmoil, changes in interest rates, natural disasters, unforeseen actions of other investors, or other external happenings. These factors have an impact on the overall performance on the financial markets and can be reduced by using long-term investment perspective together with diversification of asset allocation.
Liquidity risk refers to a situation on the market when there is no sufficient demand for the investment being sold. There almost always are certain assets that are liquid, but certain investments can face a situation when either there are no buyers, or the price at time of withdrawal is lower than expected. Periods of illiquidity may cause a prolonged exit from the investment.
Another problem caused by the liquidity risk is when the exit from the investment cannot be prolonged, and the investor is obliged to withdraw an investment at a specific moment. This can result in decrease in returns or even partial loss of primary assets. In addition, other
expenses, such as increased sales commissions, extra advertising, investment valuation, etc. also might take place because of that.
Inflation risk materializes when the inflation rate is greater that real rate of return which can lead to direct losses.
Investors or companies that have assets across national borders are exposed to currency risk that may create unpredictable profits and losses.
Political instability, civil disorder, and other similar actions in the local environment can significantly drop the value of an investment.
Local government and regulatory bodies have significant impact on economic environment which can lead to regulatory, or legal risks. For example, a change in laws or regulations made by a regulatory body can increase operating costs, reduce the attractiveness of an investment, or change the competitive landscape. Unstable social and economic environment worsens investment climate in the region which directly affects investment activities.
Interest rate risk
Interest rate risk arises from fluctuating interest rates which cause prices of certain assets to go up or down.
Specific risk is a risk associated with a certain company, asset, field of activity or place. The upside is that this type of risk can be almost fully eliminated by diversification of investments.
Monethera’s analytical team carefully studies each investment opportunity presented on the platform from financial, legal, technical, marketing and other perspectives, thus making the process and result detailed and unbiased.
Since Monethera is a company, its operation is correlated with certain risks that may lead to company liquidation. In case that happens, certain operational and legal actions will be carried out in order to preserve Monethera participants’ investments.
Minimizing and mitigating investment risks
Monethera specialists suggest conducting the process of evaluation and mitigation of risks independently or with help of a professional third-party investment advisor before making any investments.
Since the information about investment risks comes from various third-party sources, Monethera cannot ensure its accuracy, reliability and completeness. This information should not be treated as a professional investment advice. We strongly suggest consulting with professional investment advisors before making any investment decisions.