Comments on: Is It Time to Rethink Risk? http://www.goodfinancialcents.com/investment-risk-stock-market/ Helping You Make Cents Of Investing and Financial Planning Mon, 22 Feb 2010 18:30:30 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: the weakonomist http://www.goodfinancialcents.com/investment-risk-stock-market/comment-page-1/#comment-317 the weakonomist Sat, 24 Jan 2009 04:55:03 +0000 http://www.goodfinancialcents.com/?p=1983#comment-317 Good example of each: Market Risk - Microsoft profits suffering because of the recession. Their price goes down because no one is making money, therefore not buying Microsoft products Interest Rate Risk - Getting a 12 month CD at 3.75%, but 2 months from now you could have gotten 4%. Inflation Risk - Keeping your cash in ING Direct at 2.4% and inflation is running 3%. Credit Risk - AKA default risk, you get a loan at 6.5% while your friend can only get 7.5% because his credit isn't as good. International Risk - Investing in an Ukrainian natural gas company. International Risk is sort of generic like you said. It can include currency risks, political and economic risks, and the risk of geological disaster. I've come to refer to it as sustainability risk. This accounts for the instability of the country's economy, political situation, and certain disasters that could wipe out a company. A small oil importer in New Orleans could carry the same disaster risk. Another Katrina could wipe out the company. Basically the sustainability risk is any factor beyond the company's control that could potentially impact the company's ability to pay me consistent earnings. Good example of each:
Market Risk – Microsoft profits suffering because of the recession. Their price goes down because no one is making money, therefore not buying Microsoft products
Interest Rate Risk – Getting a 12 month CD at 3.75%, but 2 months from now you could have gotten 4%.
Inflation Risk – Keeping your cash in ING Direct at 2.4% and inflation is running 3%.
Credit Risk – AKA default risk, you get a loan at 6.5% while your friend can only get 7.5% because his credit isn’t as good.
International Risk – Investing in an Ukrainian natural gas company.

International Risk is sort of generic like you said. It can include currency risks, political and economic risks, and the risk of geological disaster. I’ve come to refer to it as sustainability risk. This accounts for the instability of the country’s economy, political situation, and certain disasters that could wipe out a company. A small oil importer in New Orleans could carry the same disaster risk. Another Katrina could wipe out the company. Basically the sustainability risk is any factor beyond the company’s control that could potentially impact the company’s ability to pay me consistent earnings.

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