9 Risks to Your Investments

In investing, uncertainty takes many forms. Here's your guide to understanding some of the most important ones

Adam Zoll 3 September, 2014 | 1:01PM
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The risk/reward principle is among the most central tenets of investing. Simply put, the greater the risk one is willing to take, the higher one's potential gain. But risk can take many forms. So many, in fact, that the term can be applied to almost any source of uncertainty. As you read this, you might be exposing yourself to career risk if you're at work and the boss thinks you're wasting time, or eye-strain risk if you forget to blink enough.

Investors tend to home in on a specific set of risks—particularly those with the potential to directly or indirectly reduce investment performance. Some risks, such as economic risk, are rather broad, affecting multiple asset types, while others are more focused.

To help readers understand some key types of risk and how they relate to investing and personal finance, we offer the following set of definitions. It is by no means comprehensive. In fact, after reading it you may be inclined to identify other forms of risk present in your own daily life—marriage risk if you forget yet again to stop at the supermarket on the way home, health risk if you say yes to that second piece of cake, and so on. Those risks, at least, are within your control (more or less). As investors, it's managing the risks we can't control—including the following—that’s the real challenge.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Adam Zoll  is an assistant site editor with Morningstar.com, the sister site of Morningstar.co.uk.