When you decide to invest your money, it is always a risk. Anyone who tells you otherwise is probably running some sort of scam or trying to build up a false confidence. The risk may be low, but it is always there.
One example of risk is the market risk itself. The market conditions alone can cause the value of your investments to rise or fall. If there is a recession and no one can afford to buy homes, for instance, then real estate investments may actually decline in value, no matter how solid they looked when you bought them.
Other reasons for value changes include:
- Corporate decisions
- Breaking news
- Business mergers
- Business expansions
- Local events, especially with international investments
- Political changes
- Drastic changes in the value of a currency
- New products and developments in the same space
On top of all of that, you have to consider the risk from the type of investments you choose. For example, there is something known as concentration risk, which is when you do not spread your investments out very much. The reward could be greater if that specific asset does well, but the risk you face is also far greater. If you only need one asset to decline to wipe out all of your investments, that can be a rather fragile financial position.
That being said, you sometimes face risks from untrustworthy investment brokers, who may mismanage your investments or mislead you about the risks. When this happens and you suffer serious financial harm as a result, you absolutely need to know what legal options you have.