market prices, Valuation Principle, Net present Value, interest rates, and bonds.
When a person decides to invest in the stock market the investor has to be willing to accept risk. Risk can be defined as the possibility that the actual return on an investment will be different than the expected return (Thefreedictionary, 2011). There are two types of risks systematic and unsystematic risk. Systematic risk refers to risk that affects the entire marketplace, while unsystematic risk is risk that is related to a specific industry. Investors have to accept systematic risk because it cannot be manage by the investor. Unsystematic risk can be managed by the investor. For instance if the investor has a stock from an industry that faces major risks the investor can sell off that stock to eliminated the unsystematic risk.