The 8 Types of Investment Risk

Financial Autonomy

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7M ago 12:59

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Investing is all about risk and reward. In endeavoring to build our wealth and gain choice in life, we take on risk with the expectation that we will be rewarded for taking on that degree of uncertainty.

The Oxford Dictionary defines risk as the “possibility of something bad happening at some time in the future”. As investors that typically means a loss of our capital, either partially or in full.

We think a lot about the potential rewards and the long-term outcomes that derive from the gains made by our investments, but this week I wanted to spend a little bit of time digging into some detail on the risk side of the equation. I've identified 8 different types of risk that are relevant for us investors.

To be fair this list probably has more of a bias to stock market investors. I haven't included things like credit risk which would be relevant for bond investors, or risks that are unique to property investment.

I'm hoping that as I go through these eight types of investment risk you mentally tick them off against your portfolio and reflect on whether you were comfortable with the level of risk that you are sitting at.

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