Investing in the stock market offers high returns but comes with several risks. Market risk is the most common, where prices fluctuate due to economic conditions, geopolitical events, or changes in interest rates. Company-specific risk arises from poor management, financial losses, or scandals that can crash a stock’s value. Liquidity risk occurs when an investor cannot sell shares quickly without significant price drops, common in small-cap stocks.

Volatility risk leads to sharp price swings, causing panic selling or overbuying. Sector risk affects entire industries, tech or energy, due to regulatory changes or technological disruptions. Inflation risk reduces purchasing power if returns don’t outpace rising prices. Additionally, leverage amplifies losses when trading on margin.

Psychological risks, such as emotional trading (fear or greed), often lead to poor decisions. Currency risk impacts international investments if exchange rates move unfavorably. Lastly, systemic risk—like a financial crisis—can crash the entire market.

To manage these risks, investors should diversify portfolios, research thoroughly, set stop-losses, and adopt a long-term strategy. Understanding these risks helps in making informed decisions while navigating the stock market’s uncertainties.