What Risk Means to Your Portfolio Investors generally face some or all of the following types of risks. Market Risk When the market falls, it tends to pull down the value of most individual securities with it. Afterward, the affected securities may recover at rates more closely related to their fundamental strength. Market risk affects most types of investments, including stocks and bonds. A long-term investing strategy may help reduce the effects of market risk. Economic Risk Corporate earnings can suffer when the economy falters. Though some industries and companies may adjust to downturns in the economy very well, others — particularly large industrial firms — could take longer to recover. Specific Risk Some events may affect only a certain company or industry. For example, management decisions, product quality, and consumer trends can affect company earnings and stock values. Diversifying your investments could help manage this kind of risk.
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