Stocks and risk

AngieDo you like riding roller coasters? How about jumping off the high-dive? That’s taking a risk! When you invest, you’re also taking a risk. After all, if a company does well, its share price will increase. If the company doesn’t do well, the company’s stock can lose value.

What makes an investment risky? Lots of things — and sometimes they have nothing to do with the company itself. World events and trends can influence the price. So can government taxes and policies. Even consumers’ and investors’ optimism about the future of the economy can affect overall prices.

Graphic labeled “Title of “Investing = Risk”, with a chart with an arrow going up representing gains, another chart with an arrow going down representing losses.

AngieSo before you invest, do your homework! Study a company before you buy their stock. Look at what’s happening in the U.S. and the world. Ask yourself if those events will affect the company you want to invest in. Investing isn’t for everyone because there’s so much risk involved. Plus, you have to be at least 18 years old. Still, it’s good to learn as much as you can — even now — so that later, if you do invest, you’ll know what you’re doing. And if you ever need help with investing, you can always talk with an investment advisor.

Consider these factors of risk

  • World events — natural disasters, war, political unrest
  • Government — taxes and policy
  • Investor optimism — or not…
  • Consumer optimism — is consumer confidence up? Are people buying things?

Click the Next button to learn about stock indexes and changes in share price.