Establishing the investment approach that’s best for you is not always straight-forward but understanding some fundamentals, and your long-term objectives, will certainly help.
Like most things in life, investing involves an element of risk. But what we are specifically looking at here today is investment risk.
As defined by The Economic Times, investment risk is “the probability or likelihood of the occurrence of losses relative to the expected return on any particular investment”.
It can also speak to the uncertainty of investment outcomes, or more simply, the chance of your investment declining in value.
And “while higher risk means more uncertainty and a larger probability of loss, it also means greater potential return for investors willing to take on that higher risk”. Ellevest.
Investment volatility however, speaks to change - how often a value might change and by how much.
According to The Balance “volatility in investing refers to up or down shifts in the price of a stock, bond or other security over time…And the more volatile a security is, the greater the potential it has to lose or gain value in the short term”.
Many factors can contribute to investment risk and volatility, including the political landscape, global events and trends and the length / duration of your investment.
So, how do you best balance the risk vs volatility in your investment strategy?
First, by recognising that they are indeed different.
Next, we recommend working with a trusted financial adviser who can help you to make informed, objective decisions. At Hub Advisory Group we work with our clients to develop a considered and planned approach to their finances, without the stress.
If you’d like to know more, don’t hesitate to make an appointment.
Sources:
The Economic Times - https://economictimes.indiatimes.com/definition/investment-risk
Ellevest - https://www.ellevest.com/
The Balance - https://www.thebalance.com/what-is-volatility-357647
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