GLOSSARY TERM
Risk
Risk means the chance that an investment will not perform as you hoped, or that its value may fall.
What does this mean in practice?
In investing, risk does not only mean losing money permanently. It can also mean that the value of your investment moves up and down, that returns are lower than expected or that you need your money at a bad time. Different investments have different levels of risk. Stocks usually carry more short-term ups and downs than bonds or cash, but they may also offer higher long-term returns.
Example
If you invest in a stock market ETF, its value may fall 20% during a bad year. That is part of investment risk. If you stay invested long enough, the value may recover, but the drop can still feel difficult.
Why it matters
Understanding risk helps you choose investments you can realistically hold through both good and bad periods. The best portfolio is not the one with the highest possible return, but the one you can stick with over time.
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