What is Risk?

When talking about investments, risk and return are two terms that will come up often. What do they really mean?

Risk refers to volatility – how often, and how dramatically the value of an investment will move up and down. For most people, risk is the possibility of losing money or receiving a lower return than expected in any given period of time.

Return refers to the increase (or decrease) in value of an investment, which Tasplan members receive via annual interest crediting rates. Returns can be positive (an increase in value) or negative (a decrease in value).

Generally, assets that provide potentially higher returns also carry more risk. On the other hand, assets with lower risk normally provide lower returns.

For example, cash in a bank account does not change much in value, so it is essentially a low risk investment.

Shares however, can rise and fall in value quite substantially, so the degree of risk is higher.

The challenge for you in making your investment choice, is to balance your desired returns with the degree of risk you are comfortable with.

Why not try the Risk Profile tool to help you.

This is not intended to be a substitute for getting professional advice, but will help you understand your risk profile and determine the type of investor you are.

We recommend all members seek professional financial advice in determining the option to best suit them. If you are already a Tasplan member, this is a free service, so why not take advantage of it?

Just call us on 1800 005 166 to make an appointment, or email us for more information.

Links to related articles:
investment performance
Where your money is invested
Investment policies