31 Oct To 6 Nov 22

Groww Digest
6 Day Course
Theme: types of risks

Oct 31 to Nov 6, 2022
6 Day Course is a part of our newsletter

series, Groww Digest - all things personal
finance.
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Day 1: Monday
6 Day Course | Theme: types of risks
Risk is one of the most discussed and least

understood topics in investing.
Even when thinking of risk, many investors

simply think of one kind of risk.
Let’s start with the first kind of risk.
Investment risk.
This risk is one of the most talked about risks.

This is basically the possibility of losing money
because of falling prices.
You invest in a company’s stock today and its

price falls in some time. When you need
money, the stock’s value is low and you have
to take a loss while selling the stock.
Page: 2
Day 2: Tuesday
Inflation risk.
What if the inflation rises much more than you

expected? That does happen unexpectedly.
Even if you managed to get a return of 15% per

annum, if the inflation rate is 12%, you barely
made any returns.
This is why inflation is a kind of risk itself.
Systematic risk.
Similarly, on a larger level, what if the country’s

economy or the global economy starts suffering?
That would affect most kinds of investments.
Or if the interest rates are increased — resulting

in a slowing economy (this is happening in many
parts of the EU and the USA right now).
These kinds of risks are termed systematic risks.
Page: 3
Day 3: Wednesday
Political or government risk.
As the name suggests, this kind of risk arises

because of political or government reasons.
A government change, unrest, law changes,

etc. can also adversely affect investments.
Exchange rate risk.
This kind of risk arises from a change in

exchange rates between countries and their
currencies.
Exchange rates greatly impact imports and

exports happening in a country.
Page: 4
Day 4: Thursday
Liquidity Risk.
Liquidity means the ability to convert to cash.

So, if you can take an investment and convert
it to cash quickly, it is said to be highly liquid.
On the other hand, if this process takes time,

it is said to be less liquid.
Liquidity risk is the risk of not being able to

convert investment to cash when needed.
Timing risk.
This is the risk of suffering a loss or getting

poor returns because of a short period of
downturn.
So if you need money right now but the

markets are down — that’s timing risk.
Page: 5
Day 5: Friday
We’ve covered some kinds of risks so far.
There’s a famous quote, ‘risk is what you

didn’t see coming’.
This is one of the most important detail we

need to be aware of about risk.
We can never be fully prepared for all risks.

We can only manage and reduce risk to some
extent.
Investors should always think in terms of

risks, and not just in terms of returns.
Page: 6
Day 6: Sunday
We’ve reached the end of this week’s course

that started on Monday.
Here’s a test you should take. Get pen and

paper!
Question 1:
You invest in a company’s stock today and its
price falls in some time. When you need
money, the stock’s value is low and you have
to take a loss while selling the stock. This is an
example of:
-Investment risk
-Country risk
Question 2:
A country’s economy is suffering and all stocks
are down. This is an example of:
-Unsystematiic risk
-Systematic risk
Page: 7
Day 6: Sunday
Question 3:
Which kind of risk has a greater impact on
imports and exports?
-Inflation risk
-Exchange rate risk
Question 4:
Not being able to find a buyer for something you
want to sell is an example of:
-Timing risk
-Liquidity risk
Question 5:
If the prices of commodities increase more than
expected, it is an example of:
-Inflation risk
-Govt or political risk
Page: 8
Day 6: Sunday
Answers:
Q1: Investment risk;

Q2: Systematic risk;
Q3: Exchange rate risk;
Q4: Liquidity risk;
Q5: Inflation risk.
Page: 9
That’s it for this week!
Want to get Groww Digest in your email?
Click here: Get Groww Digest
See you next week!
—Groww Digest Team
Page: 10

31 Oct To 6 Nov 22

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Groww Digest

Theme: types of risks

6 Day Course is a part of our newsletter

Want to get Groww Digest in your email?

Click here: Get Groww Digest

Risk is one of the most discussed and least

Even when thinking of risk, many investors

Let’s start with the ﬁrst kind of risk.

This risk is one of the most talked about risks.

You invest in a company’s stock today and its

What if the inﬂation rises much more than you

Even if you managed to get a return of 15% per

This is why inﬂation is a kind of risk itself.

Similarly, on a larger level, what if the country’s

Or if the interest rates are increased — resulting

These kinds of risks are termed systematic risks.

Political or government risk.

As the name suggests, this kind of risk arises

A government change, unrest, law changes,

Exchange rate risk.

This kind of risk arises from a change in

Exchange rates greatly impact imports and

Liquidity means the ability to convert to cash.

On the other hand, if this process takes time,

Liquidity risk is the risk of not being able to

This is the risk of suﬀering a loss or getting

So if you need money right now but the

We’ve covered some kinds of risks so far.

There’s a famous quote, ‘risk is what you

This is one of the most important detail we

We can never be fully prepared for all risks.

Investors should always think in terms of

We’ve reached the end of this week’s course

Here’s a test you should take. Get pen and

Q1: Investment risk;

Want to get Groww Digest in your email?

Click here: Get Groww Digest

See you next week!

—Groww Digest Team

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