What does 'risk tolerance' mean?

Risk tolerance is how much investment risk you are comfortable with. It is about your personal ability to handle potential losses. Someone with a high risk tolerance might be comfortable with more volatile investments. Someone with a low risk tolerance prefers safer, but potentially lower-returning, options.

Is it possible to avoid all investment risk?

No, it is not possible to avoid all investment risk. Even seemingly safe options, like cash, carry risks such as inflation risk. The goal is to understand and manage risks. You want to make informed choices that fit your financial goals and comfort level.

What is diversification and why is it important?

Diversification is spreading your investments across different assets. This could include various types of shares, bonds, or property. It is important because it helps to reduce your overall risk. If one investment performs poorly, others may still do well, balancing your portfolio. It reduces the impact of a single bad investment.

Where can I get help with understanding investment risk?

You can get help from a regulated financial advisor. They can assess your individual situation and risk tolerance. They can also provide personalised advice on managing investment risks. Always check that your advisor is FCA Aware to ensure they meet professional standards.

Is cryptocurrency an FCA-regulated investment?

No, cryptocurrency is not FCA-regulated in the UK. This means that investments in cryptocurrency are not covered by the Financial Services Compensation Scheme (FSCS). Investors do not have the same protections as with regulated financial products.

The FCA stands for the Financial Conduct Authority. It is the conduct regulator for financial services firms and financial markets in the UK. The FCA aims to make financial markets honest, fair, and effective for consumers.

Home/Learn/Risk Management/Understanding Investment Risk: A Beginner's Guide

Beginner

7 min read

Understanding Investment Risk: A Beginner's Guide

This guide explains investment risk for Australian investors aged 50+. Learn about different risks and how to manage them for a secure financial future.

TradeRadarNews Team

Editorial Desk