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Investment Risk

All stock market investments carry a certain amount of risk. Generally, higher levels of risk are compensated for with potentially higher returns, but equally a higher chance that the investment may fail altogether.

Generally, the safest place for money is a bank or building society. However, over time, this will be eroded by inflation.

What is your appetite for risk?

Before you invest your money, you should understand your attitude to risk. Ask yourself questions such as:

  • Is the money needed for something else?
  • Can you afford to lose it?
  • Are you investing it in order to grow it for certain use later on?
  • Do you need an income from the investment?
  • Are you happy that the potential return is worth the risk that is being taken on?

Mitigation by diversification

Mitigate your investment risk by having a range of companies in a range of sectors across a range of geographical areas. For instance, if you buy Aviva (the owner of Norwich Union) and Prudential and there is a severe hurricane, the chances are that both companies will suffer due to the claims they will have to pay out on and your portfolio would suffer doubly as a result. However, if you held Aviva and Sainsbury's for instance, the supermarket would not be affected by the hurricane and part of your portfolio would hold up in value, limiting your losses.

For smaller investors an easy way to achieve diversification is through 'collectives'.

Understanding Shares »

  • Investments and income arising from them can fall in value and you may lose some or all of the amount you have invested.
  • The services and investments referred to in this website may not be suitable for all private investors; before taking any action based upon this website you should consult ourselves or an independent adviser.
  • If you require more guidance with investment decisions or wish to place the management of your portfolio in expert hands, please contact your local branch or call 0113 200 6560 and we will discuss with you the suitability of our services and products.

Info Point

Learn more about investing:

Stock Market for Beginners »

Which Service Should I Choose? »

Investment Risk

Understanding Shares »

Types of Investment »

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