Question

what are the risks of investing in sharemarket

Answer 1

Solution:

There are several risks of investing in share market like:

1) There is no guarantee or assurance that the money invested will be repaid in the event of winding up of the company.This is because shareholders are repaid at the last after paying all the obligations.

2) Dividends payable are at the discretion of the management of company. So, even if the company is performing well, it may choose not to pass on the profits to the shareholders.

3) If the overall economy is not performing well (ongoing covid-19 pandemic), share prices tend to decline and become very volatile and hence shareholders are bound to sell their shares at a loss.In a nutshell, shareholders often are bound to sell shares at a loss when they are in urgent need of money .