Aggregation of companies and individuals who participate in buying and selling of stocks in a loose economic transactions network or a discrete entity is called equity market, share market or stock market. There are two end results expected by companies and individuals who choose to invest in a stock market, that is, lose money or gain money. In other words, investing in the stock market involves risks that are discussed in this paper.
There are two major risks when investing in a stock market. One there is no guarantee of returns on investment (Baker & Filbeck, 2015). While shares have performed well over an extended period of time historically, an investor is not guaranteed to make money on shares at any particular time. It's hard to predict the performance of stock in the future. Another key risk is a high likelihood of losing all money invested (Baker & Filbeck, 2015). Stock prices change often. With the price fluctuations, one has to be very contented with the risk of losing money especially if the plan is not a long-term investment.
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Risk takers in a share market mitigate these risks in order to maximize their profits and minimize losses. One way to mitigate the prevailing risks is to hold a diversified stock portfolio. This means that by buying stocks from companies with different features, the probability of losing money reduces. Another way is to have a long-term investment. The share market is subject to fluctuations in the short term (Baker & Filbeck, 2015).
Centum Investment Company Limited and Airtel Kenya Limited are the choice companies to invest in. After analyzing the shareholder's equity of the two companies, Centum Investment Company Limited carries the day. Their money-generating activities are diversified thus the risk of losing money is minimized. The shareholder's equity of Centum Investment Company Limited is relatively higher.
References
Baker, H. K., & Filbeck, G. (2015). Types of Risks. In H. K. Baker, & G. Filbeck, Investment Risk Management (p. 94). New York: Oxford University Press.
