Difference between Risk and Uncertainty in Stock Market
What is Risk and Uncertainty in Stock Market.All investment included risk whether in stock market, banking instruments and all financial sector, real estate, gold etc.Risk and Uncertainty included with all financial product.Stock Market is not predictable,its totally uncertainty sector.Risk in stock market shows in particular stock or company cause of some internal reasons of company and stock goes up and down in speedily or in one directly fluctuations.Uncertainty in stock market shows market risk on whole stock market cause of politics reasons, bank policy, climate disaster or war etc.
Risk V/S Uncertainty in Finance
Risk vs Uncertainty in finance sector is very important component,if any person investing in stock market.He takes risk and if suddenly market crash due to external issues.Its is Uncertainty.In Risk segment minimize is own risks but in market uncertainty issues customer cannot minimize own risk because of all index down due to external issues.
Risk Definition
According to Fischer and Jordan risk is the,The variability of return around the expected average is thus a quantitative inscription of risk.
Market Uncertainty
Market Uncertainty cover all Market Index and all shares fluctuation are too high.In market uncertainty the price of all stock moving in same direction.Market Uncertainty is a market risk due to same specific reason as like politics, bank policy or war between country.All these reason is important for market but any one gets less than invested amount because of company result or company internal issues,its situation comes under risk.Risk is controllable.
If any one invested in stock market and further started war with neighbour country.In this period all market goes down in scary environment,investor sold complete portfolio due uncertainty because market when will grow,nobody know its.Uncertainty is uncontrollable element.
Difference between Risk and Uncertainty
1.)Risk is Controllable.
2.)Customer can diversify portfolio because diversification can minimize risk in this situation.
3.)Uncertainty is uncontrollable.
4.)In market uncertainty customer cant diversify portfolio because all market will be in same direction that means all shares of company will be down in this situation.
5.)Main difference between risk and uncertainty, risk is associated with internal issues of company as like sale result,production or management issues etc but uncertainty included with market risk or external reason as like bank policy, government policies or war with neighbour country etc.
Stock Market Uncertainty
Stock Market Uncertainty is nature of stock market.Nobody predict market.In market uncertainty market moves in same direction.In market uncertainty investor see high ups and downs.
Example of Risk and Uncertainty with explanation
If Mohan invested 1 lakh rupees in stock market in different stocks,suppose that he bought 10 stock of different companies.He is diversify portfolio with different companies.In this situation all risk is controllable because he has 10 companies share his risk will be very minimum,If one company share down with any reasons but all 9 companies will be in safe situation that means risk is controllable with diversification but politics issues, other country issues or natural disaster created market uncertainty.In market uncertainty mohan cant do anything.
What is difference between risk and uncertainty, all you have understand with this example.You have taking a decision in market uncertainty that time keep patience and when you are in risk segment if you can safe with diversification strategy and when you are in market uncertainty you should keep patience till sort out this situation of external issues after that stock will be in good situation.
In my opinion risk or uncertainty in stock market is depend on systematic risk or unsystematic risk.Systematic risk included with market risk or external reason and Unsystematic risk included with stock specific risk or internal issues of companies.
Hope you understand this article,What is Risk and Uncertainty in Stock Market,if there is any question related to this article, then you can ask and comment.
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