Understanding the Risks

A number of specific risks can affect your investments. As part of developing your investment plan you should understand the potential risks involved.

One of the ways to define risk is the likelihood that an investment’s actual return will differ from your expectations.

Country Risk

The risk that domestic events such as political upheaval, financial troubles, or natural disasters will weaken a countries financial markets.

Currency Risk

The risk that changes in currency exchange rates can cause the value of an investment to decline.

Inflation Risk

Inflation is a measure of the rate of increase in general prices for goods and services. The most familiar measure in the UK is the Retail Price Index (RPI).

The risk that inflation poses is that it can erode the value or purchasing power for your investments.

Liquidity Risk

The chance that an investment maybe difficult to buy or sell.

Market Risk

There are risks associated with the majority of asset classes. This is what professionals call market risk. Market risk is the risk that investment returns will fluctuate across the markets in which you are invested.

Short Fall Risk

Short fall risk is a possibility that your portfolio will fail to meet your long term financial goals.

Market Correction

This translates to a temporary downward movement in an otherwise healthy equity or bond market.