Risk is a part of everyday life. From the risk that the delivery you have been waiting in for all morning will arrive just as you ‘pop out’ for five minutes, to the risk that you take - in a measured way - when you pull out in your car onto a busy motorway.
Buying a new house, starting a new job, having a baby, even picking something new off the menu at your favourite restaurant - rather than plumping for the exact same thing for the hundredth time; they are all risks in their own way.
And the fact that risk is a part of everyday life means that, whether we realise it, or not, we are all used to assessing risk. Yet, it is exactly this factor that deters so many would-be investors. So much so that these people steer clear of investing and - by sticking to cash - actually, inadvertently, put their hard-earned money at even more risk (from inflation and the like) in the process of picking the perceived ‘safer’ option.
But never mind the risk of investing in the wrong thing, or at the wrong time. How about the risk of not having enough to live off in retirement or missing out on your dream because fear held you back?
That’s not to say that risk should be ignored. It’s a very real thing and it’s also important to realise that risk isn’t ‘one size fits all’. What one person thinks is risky, another wouldn’t think twice about.
Determining your own appetite for risk is key. How old you are, what you’re investing for and what other savings and investments you have, as well as how you react in times of adversity all help determine the level of risk you can stomach, might face, or should avoid.
As a general rule, the longer you have to let your investment grow, the higher the risk you can take to reap the greatest rewards. Being smart with your investments is key to success, as the real-life investors in our Invest for Life series have all identified.
Each of them has a different attitude to risk. And they all have very different strategies for dealing with it. Yet they are all ultimately keen to harness the flipside of risk - and reap the rewards.
You can’t remove risk altogether, and you wouldn’t want to because risk also comes with reward in many areas of life - and especially so when it comes to investing.
You can watch our Invest for Life episode on risk and reward below.
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Important information: The value of investments and the income from them can go down as well as up so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
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