What are the risks associated with investing?

Investing inherently involves various risks that must be understood by potential investors. New York Life Investment Management, like any reputable financial institution, emphasizes the importance of recognizing and managing these risks in order to make informed decisions. One of the primary risks associated with investing is market risk, which refers to the possibility of losing value in investments due to overall market fluctuations. This risk affects all types of investments, including stocks, bonds, and mutual funds. Economic factors, such as changes in interest rates or inflation, can also contribute to market risk. Another significant risk is credit risk, which specifically pertains to the possibility that a bond issuer may fail to make required interest payments or repay principal at maturity. This is particularly relevant for fixed-income investments. An investor must assess the creditworthiness of issuers, as this will impact the overall risk level of their portfolio. Liquidity risk is another concern, which occurs when an investor is unable to buy or sell an investment quickly without adversely affecting its price. This situation may arise in illiquid markets or with investments that do not have a ready buyer or seller. Additionally, there is the risk of managerial decisions and operational issues that can impact an investment, known as business risk. This risk is particularly salient when investing in individual companies or actively managed funds. Investors should also be aware of inflation risk, which refers to the potential for rising prices to erode purchasing power over time. It is crucial that individuals consider their risk tolerance, investment objectives, and time horizon when constructing a portfolio. For more information about managing investment risks, it may be beneficial to explore the resources available on the current New York Life Investment Management website.