Inflation is the artificial expansion of the amount of money so that too much money is used in the exchange of goods and services. For consumers, inflation appears in the form of higher prices for goods and services. Risk of inflation also known as purchasing power risk. This term means that the money does not buy as much as used to. For example, a dollar bought him a sandwich in 1980 just bought a candy bar a few years later. For you, the investor, this risk means that the value of your investment (a bond, for example) may not keep pace with inflation.
People talk about the market and how it is going up or down, which makes it sound like a monolithic entity, rather than what it really is a group of millions of people who make daily decisions to buy or sell shares. No matter how modern society and our economic system, can not escape the laws of supply and demand. When the masses of people who want to buy a certain value, it becomes demand and price rises. That rises higher prices if the supply is limited. On the other hand, if nobody is interested in buying a stock, its price falls. Supply and demand is the nature of market risk. The price of shares you can buy rise and fall of the fickle whims of market demand. Millions of investors buying and selling every minute of every trading day will affect the share price of their stock. This fact makes it impossible to determine how its stock will move tomorrow or next week. This apparent irrationality and unpredictability is why stocks are not suitable for short-term financial growth.
The markets are volatile by nature, but they go up and down, and investments need time to grow. This poor boy (literally now) should have been aware of the fact that people generally are not suitable for short-term objectives. Despite that companies invest in it may have been fundamentally sound, all stock prices are subject to the gyrations of the market and need time to the upward trend.
They paid a considerable sum to the exploration of their housing equity to invest in the stock market. What to do with these funds? You guessed it invested in the high-flying stocks of the day, which are high-tech and Internet stocks. Within eight months, he lost almost all his money. Understanding market risk is especially important for those who are tempted to lay their eggs or nests of emergency funds in volatile investments such as growth stocks (or mutual funds that invest in shares or similar aggressive growth investment). Remember, you can lose everything.
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