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What is market risk and what is stock risk?

There are many terms which are common in the investment arena and while many investors may have come across the majority of them there will always be some which attract a little confusion and can often be mixed up. Market risk and stock risk are two such risks which many investors often mistake for being one and the same one in fact they are very different.

Market risk

Market risk is the specific risk to an investment market whether this be a specific country investment market or the worldwide investment market. For example even if you picked the best share in the world with the best prospects and the particular stock market and they were listed upon collapsed then your share would have great difficulty providing a significant return to you. In this example you have chosen the right stock but the wrong time to invest in the market.

Stock risk

Stock risk is the specific risk associated with one company's shares you have acquired. The risk is on the upside and downside in that if you pick a "good stock" and the market remains fairly steady then you have a good chance of making a decent return. However, if you pick a "bad stock" which may have financial difficulties or issues specific to its own operation then the risk is on the downside even if the sector and stock market are strong.

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