Although equity investment boasts a very attractive return, there are some risks that investors must be aware of. It is recommended for investors to understand these risks in order to minimize its subsequent consequences. Some of these risks are listed below.

1. Country’s Conditions

A country’s economic and political conditions are closely tied to the stock market. You wouldn’t want to invest in a country that is currently in a crisis, as there would be no certainty and security into your investment. It is also recommended to not invest in a country with a shrinking economy, as that will pose similar consequences.

2. Capital Loss

Capital loss is a result of an investor selling the stock with a price lower than its purchase price. For example, an investor buys 'A' shares at Rp. 3,000 per share. Suddenly, the stock price decreases to Rp. 2,700 per share. Due to the underlying fear of its price continuing to fall, the investor sells the stock immediately (cut loss). This means that the investor has generated a capital loss of Rp. 300 per share.

3. Exchange Rate Risks

Drastic changes in the currency exchange rate in a short period of time has a big influence on the stability of its stock market. It has the potential to disrupt the market, especially on the shares of companies with large debts in foreign currencies. A significant increase in the currency's exchange rate could also cause a deflation that damages the entire economy in the long run as exports become less competitive.

4. Suspension Risk

In the event of a company’s stocks being suspended by the stock exchange authorities, investors are unable to sell their shares until the suspension is lifted. The duration of the suspension varies, as it can last for one or several days of trading.
There are several reasons for a company’s stocks to be suspended, namely:

1. Abnormal stock price movement in a short period of time.
2. Creditors seeking bankruptcy for the company
3. The company failing to supply the exchange authorities with important information within an allotted period.

 5. Liquidity Risk

This risk is related to the market’s capitalization and the size of its stock transaction. It would be difficult to sell illiquid stocks at the current price when necessary. Additionally, no buyer is interested if the company declares bankruptcy by the court and is dissolved. Should these unexpected factors occur, you are required to sell all your shareholdings.

Risk management is important in stock investments as the issues above must be avoided at all costs, or if it has occured, they must be addressed immediately. It is best to buy a company’s shares that are guaranteed to be fundamentally healthy. Although the company does not have to be a blue-chip company or owns a large market capitalization, you must ensure that the company is transparent about its financial statement. You should also choose the best securities company to assist you whilst investing in the stock market. An example is Mandiri Sekuritas, which is known to be one of the best investment banks in Indonesia.