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What is investment risk?
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Investment risk is the possibility that your investment generates less return than expected or even declines in value. When you invest, you never know in advance exactly what the outcome will be. The greater the potential fluctuations, the higher the risk.
Investment risk means that returns are never guaranteed.
The value of investments can change due to economic developments, company results, interest rate changes or unexpected news. Some investments, such as shares of young growth companies, often move more strongly and therefore carry higher risk. Other investments, such as government bonds from stable countries, are generally considered less risky. Risk and return are often linked: investments with a higher expected return usually involve more uncertainty.
Short example:
Suppose you invest €1,000 in shares of a fast-growing company. In a good year, the shares may rise by 20% and your investment would be worth €1,200. But in a bad year, the shares may fall by 20% and your investment would be worth €800. That €400 difference between gain and loss shows how significant investment risk can be.
Disclaimer: Investing brings risks. Our analysts are not financial advisors. Always consult an advisor when making financial decisions. The information and tips provided on this website are based on our analysts' own insights and experiences. Therefore, they are for educational purposes only.
