Your Guide to Investment Risk and Objectives
This guide is intended to explain to you what we mean at Bay Financial Partners Ltd, by investment risk. It will assist you to decide the level of risk that you are prepared to accept and identify your investment objectives.
What is Investment Risk?
Investment risk can be defined as the degree of variability in performance of an investment over time. The greater the variability or fluctuation in the performance of a particular investment, the greater its investment risk is said to be. As this performance is directly reflected in the value of an investment, poor performance will usually result in reductions in the value of investments just as good performance will usually result in increases in the value of investment capital.
As many investors are primarily concerned with the possibility of losses to their investment capital, their tolerance to this uncertainty will usually dictate their investment risk category.
Risk vs Reward
Effectively, there is a trade-off between risk and reward so that the greater the possibility that you could lose capital, the greater the return you can expect from it over the longer term*. Similarly, investments that could bring limited losses to investment capital will also only provide limited gains to the investment.