Most of us who invest in the stock market aim for good returns with minimal risk. However, the truth is—no investment is entirely risk-free. As Albert Einstein once said, “A ship is always safe at the shore, but that is not what it is built for.” Similarly, higher returns often require a willingness to take on greater risks.

While some risks are manageable, others are beyond our control. The key lies in understanding the types of investment risks and learning how to minimize their impact. Let’s explore the major types of investment risks you may encounter.

What is Investment Risk?

Investment Risk refers to the possibility of losing money or receiving lower-than-expected returns due to changes in the market or in specific investments.

Major Types of Investment Risks

1. Market Risk (Systematic Risk)

Market risk affects the overall financial markets and arises from factors such as economic slowdowns, natural disasters, political instability, interest rate changes, or inflation. This type of risk cannot be eliminated through diversification, as it impacts almost all stocks.

Types of market risk include:

• Equity risk
• Currency risk
• Interest rate risk

2. Specific Risk (Unsystematic Risk)

Specific risk is unique to a particular company or industry, and may arise from factors such as management failures, product recalls, or sector-specific regulations. Unlike market risk, specific risk can be reduced or even eliminated through diversification.

3. Volatility Risk

Volatility refers to the degree of price fluctuation in an investment over a short period. It is commonly observed in derivatives where prices can shift rapidly based on the value of the underlying asset. High volatility increases uncertainty, thereby raising the overall investment risk.

4. Interest Rate Risk

Interest rate risk primarily affects debt instruments like bonds. As interest rates rise, bond prices tend to fall; conversely, when interest rates fall, bond prices rise. Investors can minimize this risk by holding bonds until maturity.

5. Default Risk (Credit Risk)

Default risk refers to  the possibility that a borrower may fail to repay interest or principal on a loan or bond. This risk is more common in unsecured instruments. To minimize exposure, Always check the credit rating of a company before investing in its bonds or debentures.

6. Inflation Risk

Inflation risk refers to the loss of purchasing power due to rising prices over time.Fixed-income investments such as bonds, are particularly vulnerable to this risk. As inflation, the real return on your investment may diminish or even become negative.

7. Reinvestment Risk

Reinvestment risk arises when proceeds from an investment such as interest payments or maturity amounts must be reinvested at a lower  interest rate. For example, if your bond matures and prevailing interest rates have dropped, your future returns may be lower.  One wat to avoid this by using the funds instead of reinvestin them, although that may not align with long-term growth goals.

8. Liquidity Risk

Liquidity risk occurs when you’re unable to sell an asset quickly without significant loss. While stocks and bonds are generally considered liquid, assets like real estate, art, or collectibles may not have ready buyers. In emergencies, investors might be forced to sell such assets at a discounted price.

9. Political or Regulatory Risk

Government policy changes can significantly impact specific industries or the overall economy. Regulatory reforms, change in taxations, or political instability can lead to sharp market movements. In such situations, It’s best to avoid panic selling and intead adopt a ‘wait and watch’ strategy.

Final Thoughts

No investment is completely risk-free. The key lies in understanding the different type of risks, manage them wisely, and investing in line with your personal risk tolerance. While risks are inevitable, the potential rewards of  well – informed investing can far outweigh them.

At Pentad Securities Private Limited, a SEBI-registered stockbroking firm since 2012, we blend cutting edge technical tools with expert research to guide our clients toward smarter financial decisions. Open a Demat account with us today and take your first step toward confident. intelligent investing.

For the stock market, repo rate cuts typically lower the cost of capital, encouraging borrowing and investment. This can boost corporate earnings and investor confidence. Rate-sensitive sectors such as banking, real estate, and automobiles often lead the rally, benefiting from cheaper credit and increased consumer demand.

On the corporate front, reduced borrowing costs can tip the scales in favour of greenlighting expansion projects, even as the ongoing tariff war between the US and China continues to disrupt supply chains, increase input costs, and create uncertainty for export-oriented industries. These external shocks affect investor confidence and corporate planning, complicating the RBI’s task of balancing growth and inflation.

When the RBI changes the repo rate, it doesn’t just affect the overnight borrowing cost for financial institutions; it shifts the risk-reward balance across different assets. The immediate impact is seen in the money market, where overnight rates adjust quickly. However, the more significant effect play out over weeks or even months, as banks and non-banking financial companies (NBFCs) reassess lending rates, companies reconsider investment plans, and investors adjust expectations for future earnings.

The stock market can sometimes rise when investors believe that lower borrowing costs will help companies increase their profits. Sectors like banking, real estate, and automotive tend to benefit the most from lower interest rates, leading to potential gains in these stocks. However, if the market had already anticipated the rate cut, the impact might be minimal, or the market could even decline if other negative factors, such as global trade concerns, overshadow the cut.

An increase in money supply due to rate cuts can sometimes weaken the rupee against the dollar. This devaluation may raise concerns among investors, as it could signal economic instability or raising inflation.

A higher repo rate raises the cost of borrowing for companies. When it happens, stock prices often decline as investors become more risk-averse. Conversely, when the repo rate is slashed, sectors such as banking, finance and real estate tend to benefit due to cheaper credit and increased consumer spending.

The Securities and Exchange Board of India (SEBI), in collaboration with KFin Technologies and CAMS, has launched SEBI MITRA — a centralized initiative designed to help investors locate and reclaim unclaimed or forgotten mutual fund investments.

If you suspect you have idle or unclaimed investments, here’s how to use SEBI MITRA to trace and recover them:

Step-by-Step Guide to Using SEBI MITRA

1. Access the Official Portal

Go to www.mfcentral.com, the official platform designated for SEBI MITRA services.

2. Enter Your PAN

Input your Permanent Account Number (PAN) to begin the search for mutual fund folios linked to your credentials.

3. Verify Your Identity

An OTP (One-Time Password) will be sent to your registered mobile number or email ID. Enter the OTP to proceed securely.

4. Add Additional Details (Optional but Recommended)

To maximize your chances of finding older or inactive folios — especially those created before PAN became mandatory in 2007 — you may also provide:

• Registered mobile number
• Email ID
• Bank account number
• City, PIN code, or full address
• Date of birth or nominee details

These details help in tracing folios that may not be directly linked to your PAN.

5. Start the Search

Click “Proceed” to initiate the search. The system will scan across all participating Asset Management Companies (AMCs) to identify inactive or unclaimed folios linked to your details.

6. Review Results & Update KYC (If Required)

If any folios are found:

• Follow the platform’s instructions to complete or update your KYC (Know Your Customer) formalities
• You can then begin the process to reclaim your identified investments

Important Notes

• A folio is considered inactive if there has been no investor-initiated transaction (financial or non-financial) for 10 consecutive years. These may still hold valuable units or balances.
• Each user is allowed up to 25 search attempts, giving ample scope to refine and explore forgotten assets.

SEBI MITRA is accessible Through:

• MF Central
• Individual Mutual Fund AMCs
• AMFI (Association of Mutual Funds in India)
• SEBI’s official site

Policy Backing

This initiative follows SEBI’s circular dated March 28, 2024 (Ref: SEBI/HO/OIAE/OIAE_IAD-1/P/CIR/2024/XX), aimed at:

• Strengthening investor protection
• Facilitating easy access to unclaimed assets
• Simplifying the recovery process for mutual fund investors

Conclusion

By following these simple steps, you can reconnect with forgotten investments, safeguard your financial legacy, and ensure that your mutual fund holdings are consolidated under your control.

If you’re planning to become an Authorised Person (AP) in the securities market under Pentad Securities, here’s a comprehensive guide to help you understand the process, requirements, and associated fees. This guide covers the documentation checklist, fee structure across exchanges, registration steps, and office requirements.

✅ Checklist for Appointment of Authorised Person (Individual)

Before initiating the registration process, make sure you have the following documents ready:

1. PAN Card Copy
2. Residential Address Proof
3. Educational Proof (Minimum qualification: 10th Pass)
4. Bank Proof

📊 AP Registration Details Across Exchanges

💳 Payment Details for AP Registration & Cancellation

Ensure payments are made to the account below for all NSE-related AP activities:

• Account Title: PENTAD SECURITIES PRIVATE LIMITED – NSE CASH PROPRIETORY ACCOUNT
• Account Number: 200999655681
• IFSC: INDB0000033

📝 Processing Steps for AP Registration

1. Draft Agreement – Created based on submitted documents.
2. Agreement Execution – Signed on stamp paper after confirmation.
3. Uploading – The signed agreement is uploaded to the respective Exchange portal.
4. Approval – Upon approval by the Exchange, the AP Code will be issued.
5. Intimation – Confirmation and AP code are sent via registered email.

🏢 Requirements in AP Office

To ensure compliance and readiness for operations, the following must be maintained in the AP’s office:

1. SEBI Registration Certificate
2. Visitor Register
3. Complaint Register
4. Pentad Securities Name Board
5. Recorded Telephone Line (if trading terminals are provided)
6. AP Registration Certificate

Becoming an Authorised Person is a crucial step toward building your presence in the capital market ecosystem. Ensure that all documentation and office compliance requirements are strictly adhered to for a smooth and successful registration process.

Open Pen App :

1. Tap on icon [ ]at bottom right corner.

2. Tap on Add Funds

3. Type amount in the blank column.

4. Select registered bank A/c,  if the client has registered more than 1 bank a/c with us.

5. Select the UPI App whichever is installed in your mobile.

6. It will automatically open the UPI APP.

7. In case you have no UPI App in your mobile , you can select net banking option. It will automatically open your registered bank internet banking login page.