Risk and Investor Protection

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Risk and Investor Protection The Four-Letter Word: Risk Yes, there is always a risk in investing. Investing in shares is riskier than some other investments such as bank deposits. Share prices rise and fall as economic and market forces change. The higher risk involved means that you have an opportunity to make more money through trading on SEM than in many other forms of investment. You can also lose more, which is why it’s important to realise that share trading normally does not make you rich overnight, but usually works over a longer period.

Understand Your Tolerance for Risk Your personal investment strategy will also be affected by the way you feel about risk (your risk tolerance). In the investment world there is a direct relationship between expected returns and risk - the higher the expected payback from your investment, the higher the risk. Before you can decide on a personal investment strategy, you must consider how much or how little risk you are prepared to take with your money. Your risk tolerance can be affected by the weighing up of several factors:

Time horizons - the amount of time you have to meet your financial goals and to make up for any losses you might experience. People with long time horizons may be more willing to endure periodic fluctuations in the value of their investments.


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