Know the risks in your investment

Risks in investment are of two types- namely market risk ( also called systematic risk) and company - specific risk ( called unsystematic risk ). Market risk is induces by market forces, which are external to the company.
Company specific risks are induced by factors internal to the company.
In short, systematic risk affects all businesses in that particular sector while company specific risk affects only the company in question.
Market risk are too difficult to predict but it can be possible to diversify the company specific risk and allocate the investment across various other companies. Allocations will help reduce the risk that parking all the investment in one company or a small set of companies induces. This is to ensure that prices of all the companies do not move up or down at the same time. It can be done by only one way and that's called "Correlation".

Meaning of underwriting

Term of the Day  Underwriting The underwriter (normally known as investment banker ) brings a new security issue to the investors in an offering. In this case, the underwriter guarantees a certain price for a certain number of securities to the party that is issuing the security (in exchange for a fee). Thus, the issuer feels secured that they will raise a certain minimum from the issue, while the underwriter bears the risk of the issue. Thus it is the process of insuring someone or something. The process by which a lender decides whether a potential creditor is creditworthy and should receive a loan.

Teaser Loan

Definition Of  Teaser Loan :
An adjustable-rate mortgage loan in which the borrower pays a very low initial interest rate, which increases after a few years. Teaser loans try to entice borrowers by offering an artificially low rate and small down payments, claiming that borrowers should be able to refinance before the increases occur.
This method of loaning is considered risky, as default rates are high.