After that, until age 65, it is the inability to perform any occupation for which you are trained and educated. There is the danger that he will get hurt. In a nutshell, it signifies the risk that our investment earnings might be less than we expected. Diversifiable risk just means the risk of investing in any one company, which can be affected by unexpected events, such as a natural disaster, and can be avoided by investing in many different companies or funds. Nondiversifiable risk is a measure of the reaction of an investment to events affecting the stock market in general.
Inflation risk is common for investments that have low market risk.
Since they react very little to market increases, the risk is that inflation will outpace the growth of the investment and your investment will end up with less buying power than it had originally. Interest rate risk is present for investments in debt securities, as opposed to stocks or equity investments. Unexpected changes in the interest rate can cause the return on these investments to be less than expected. Because a bond's earnings are mainly interest payments, and the issuer is obligated to repay the face amount of the bond, bonds are also considered to be low risk investments. All rights reserved.