Types of investment risk
There are some specific types of investment risk to take into account when considering investing. There are also investment risks associated with factors such as economic cycles, government policy and global instability. When dramatic changes occur in these areas, investments will be affected in some way. These investing risks can be quite unpredictable so it’s important to accept the possibility of them occurring and plan your approach if they do.
Market risk
The risk that your investments will depreciate in value due to market performance.
Currency risk
The value of one country's currency compared to that of another may fluctuate often. If you want to invest money overseas and then convert any returns into Australian dollars, you need to be aware of currency risks.
Legislative risk
Governments often make changes to legislation that may affect your investment. One area often subjected to legislative change is taxation.
Interest rate risk
Interest rate risk is the risk carried by an interest-bearing asset due to interest rate changes. Assets such as bonds are open to interest rate risk.
Learn more about Risk
- What is investment risk?
- What types of investment risk are there?
- What is my investment risk profile?
- How can I make low-risk investments?
Did you know?
Risk is the chance your investment will lose some or all of its value. The flipside to risk is return, or the potential return you’ll receive on your investment.
It’s difficult to make investments risk-free. If it wasn’t, everyone would be in a risk-free investment. You can however, minimise investment risks by adopting some proven strategies.
