KSAT Money: What is investment risk? [Video]

SAN ANTONIO – All investments have some degree of risk.

The U.S. Securities and Exchange Commission refers to risk as the degree of uncertainty and/or potential financial loss inherent in an investment decision.

Generally, investors will seek higher returns for taking an investment with a higher risk, but not all risk is the same.

The SEC points to several risks investors may face:

Business Risk

There’s business risk, which comes with buying stocks or bonds. The SEC says returns from both of these types of investments require that a company stay in business.

If the business goes bankrupt, its assets are liquidated, and the company’s bondholders are paid first and then its holders of preferred stock. Common stockholders are the last to share in whatever is left over, which can sometimes be nothing.

Volatility Risk

There’s also volatility risk. This type of risk can make a company’s stock price go up or down depending on several factors.

The SEC says stock price can be affected by factors inside the …