Risk with short term investments
Risk with short term investments
- Retail investors should be aware that all investments involve risk and that there is a high chance of loss when making short-term investments in a volatile market.
- Retail investors may suffer substantial and unexpected losses through short-term trading, including trading assisted by the use of margin or options.
- Momentum Investing - Momentum investing is a different type of investing approach that individual investors may find to be very risky. A momentum investor aims to profit from the continuation of current market trends. An investor who favours momentum thinks that significant price increases in an investment will be followed by further gains, and that the opposite is true for values that are falling. If that assumption proves to be false, it could result in serious losses.
- Noise Trading - When an investor decides to purchase or sell a security without considering fundamental data—that is, economic, financial, and other qualitative or quantitative information that could affect the security's value—this is known as noise trading. Noise traders typically make mistakes in timing, follow trends, and overreact to both positive and negative market news.
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All investments include risk. These risks could be increased if you invest utilizing margin, options, or short sells. Margin trading, which involves borrowing money to purchase shares, can be extremely dangerous and is not suitable for all investors. Before you use margin to invest, take into account that:
- Losses exceeding investments are a possibility.
- You may have to deposit additional cash or securities in your account on short notice to cover market losses.
- Your brokerage firm can increase its margin requirements at any time and is not required to provide you with advance notice.
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