Every business venture comes with a certain element of risk. This is why a lot of people prefer not to risk to their money in the unpredictable world of business. But you have to remember this. If you don't take the risk, you won't get to enjoy the profits. This is one of the fundamentals of business. The risk is always there. It is therefore up to you to do your homework and decide which risks you are prepared to take.

The stock market is an exciting and mostly lucrative venture. But if you put your money in stocks, you are also taking a lot of risk. Things may go wrong and things do go in some cases.

Below are some of the risks of trading in the stock market.

1) Stagnation:

Sometimes, you buy a stock and the price refuses to move. The price remains stable; not increasing or reducing. Now, this may mean that the stock you bought is not being actively traded on the stock market. After a few weeks of this situation, the wise thing to do is to sell the stocks and get your capital back before the price begins to drop.

2) Fraud:

You simply cannot buy stock directly from the stock exchange. You need to go through a stockbroker. In some cases, you may run into a dubious stockbroker who may defraud you.This is not very common but it does happen. A stock broker may take your money and claim he has invested it for you in stocks. But he did not. In this case, you may be in serious trouble unless you are insured and can get the money back from an insurance company.

3) Price Depreciation:

Sometimes, you may buy stock and the price of that stock will do nothing but fall. If this happens to you, you are likely to lose a large chunk of your money. Your best bet is to wait for prices to rise again before you sell.

4) Business Collapse:

If you invest in a business and the business goes under, you have lost your money. Unless you are a preference share holder, you may not ever get a dime from the company in question.

5) Price Manipulation:

The stock market is always carefully watched by the regulatory bodies and agencies. However, in some cases, there may be abuses. When a company is found guilty of price manipulation, insider trading or any other malpractice, shareholders suffer. Prices will definitely fall and trading on such stocks will be suspended for a while. All these will affect the investors even though they are just innocent people looking to make a bit of money.

But should people stop investing in stocks due to the five reasons above? Of course not. The stock market is a great investment opportunity. The risks may be there but likelihood for profit is also there.For this reason, it makes sense for you to invest in the stock market with a lot of strategy just in case things do go wrong.

Finally, remember that every time you buy stocks you may be taking a bit of a risk. The smart thing to do is to minimize your risk as much as possible by diversifying your portfolio and by keeping your eyes and ears wide open.

Learn more about this author, Emmanuel Osondu.
Click here to send this author comments or questions.

---

Add your voice

Know something about The risks of trading on the stock market ?
We want to hear your view. Write now!