Diversify your fields of investment. DO NOT put all eggs in one basket. Asset allocation and diversification can protect against non diversification risk because different portions of the market tend to under perform at different times.
7. Liquidity Risk
Liquidity Risk arises from difficulty of selling as asset. An insufficient of secondary market causes investment cannot be bought or sold quickly enough to prevent or minimize a loss when credit rating falls.
Some assets are highly liquid and have low liquidity risk (such as stock of a publicly traded company), while other assets are highly illiquid and have high liquidity risk (such as a house).
8. Gearing Risk
Gearing is borrowing to invest, or investing in leveraged assets such as installment warrants or options. Most businesses require long term debt in order to finance growth, however, the introduction of debt and gearing increases financial risk. the higher the level of gearing, the higher the level of financial risk due to the increased volatility of profits.
9. Legislative Risk
The risk that a new law or a change in an existing law by government could have a significant impact on an investment. It could significantly alter the business prospects and adversely affecting investment.
You should be aware when investing in foreign countries because countries that may often change policies and undergo political transformation are prone to legislative risk.
"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1" Warren Buffett
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