It’s known that investments on the stock market are risky investments, but building up an equilibrated portfolio can limit the risk. Its important to understand what you are dealing with and risk can be broadly categorised as follows:

Company RISK

Every company has its own risk that varies, of course, from organization to organization. So, we can find companies with low risks which usually are big stable companies, with shares worth a lot, and companies with a big risk factor or companies that never paid their dividends, that belong to an unstable economic area and their shares are worth less. To decrease the risk, even when the only intention is to speculate a little, it is recommended to invest part of the capital in low risk companies and the other part in high risk ones.
Studies conducted over the America market show that having a portfolio of at least 10-20 different types of stocks can almost eliminate the company risk.

Sector RISK

Diversifying your portfolio doesn’t only mean to own stocks from different companies, but also to own stocks from different economic sectors. The sector or industry risk threatens companies that produce similar or interdependent products, so that the investors in a certain sector have to be aware of the high risk factor. So, investing in independent sectors can be a method to diminuate the sector risk, with the possibility of conserving the initial value of the portfolio.

Market RISK

The market risk is also called the un-diversifying risk, because this risk can not be avoided no matter how many different stocks might be present in the portfolio.

In any country there are political and economical issues that can make the prices of stocks to be badly predicted and so the market risk increases. This is the only actual risk. All others can be avoided easily: lose a little with one company, but win a lot with all the others.

The market risk is to be anticipated sometimes if analyzing the situation of the country and economy itself. First determine expected political or economical changes. Then try to guess other unexpected measures that might occur. And only after that you will have to ask yourself in what way your companies will be influenced, witch sectors will grow and which fall.

While some of these risks are manageable and others are not it is essential to understand all of them and then add them to the screening process that you go through while selecting a stock.