Stock risks and their management. The stock market is constantly changing and evolving. The price of a stock can be influenced by many factors: the state of affairs within the company, the overall economic situation in the country, changes in global oil prices, and even the threat of global warming. Stock prices constantly fluctuate due to various factors, including company news that can impact profits. Positive news typically drives prices up, while negative news can cause them to fall.

How to manage price risk? The first way is not to bet on one company. It is better to invest in stocks of different companies, that is, to diversify your portfolio. This will reduce risks, but will not eliminate them, as most stocks move with the market - up or down. Therefore, the second method is to choose stocks of companies that are less dependent on the overall market dynamics. In particular, such companies include those producing essential goods (medicines, food, telecommunications, etc.).

Control risk (Corporate Governance). CIn a corporation (joint-stock company), ownership translates to control. The shareholder with the largest stake (majority shareholder) holds the most power. Minority shareholders have much fewer opportunities. And although by law the company should not discriminate against its minority shareholders, in practice, controlling shareholders often make decisions that are disadvantageous to holders of a small number of shares.

How to manage control risk? A more realistic approach is to avoid companies known for their unfriendly attitude toward minority shareholders. For example, those companies that do not pay dividends, do not inform minorities about significant events, and do not invite their representatives to the board of directors. Conversely, companies traded in the West and attracting foreign investors usually adhere to high standards of corporate governance. But even Western companies can pose risks. Therefore, shareholders should always be vigilant; monitoring and analyzing the company's performance is crucial.. 

Sources of information about the company:

1. Company Reports (on its website or on the stock exchange website): Every year, companies are required to publish reports summarizing their activities. These reports are a crucial resource for understanding a company's financial health. The balance sheet provides a snapshot of the company's financial position at a specific date, showing the difference between its assets (what it owns) and liabilities (what it owes). This difference represents the company's shareholder equity, essentially the value remaining for shareholders after all debts are settled. The profit and loss statement, on the other hand, details a company's financial performance over a period. It shows how much revenue was generated, how income was used (taxes, dividends, reinvestment), and overall profitability. By analyzing these reports, investors can gain valuable insights into a company's past performance and its future potential.
2. Prospectus. This comprehensive document provides a detailed overview of a company, the securities it offers (stocks, bonds, etc.), and the associated risks. While the prospectus might seem lengthy, it serves a vital purpose. It anticipates potential investor questions and ensures transparency by disclosing all relevant information. This in-depth exploration is not meant to waste your time, but rather to empower you to make informed investment decisions.
3. Analytical reports. Financial analysts are experts who continuously analyze vast amounts of data related to companies, industries, and even entire economies. They compile their findings into reports, offering insights and opinions on a company's health, future prospects, and potential risks. Daily reports provide a general market overview, while more in-depth reports on specific companies, industries, or countries are typically released less frequently (every few months). Analyst reports are valuable because they offer expert interpretations of complex financial data, helping investors make sense of the information and identify promising investment opportunities.
4. Ratings. Credit rating agencies assess the creditworthiness of companies and their securities. These ratings are typically presented visually and offer a quick way to gauge a company's financial health compared to its competitors. They can also be used to analyze a company's development trajectory. Ratings are a helpful tool for investors seeking a quick assessment of a company's financial stability.