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Every Investment Has Risk
Different financial products carry different levels and types of risk. Understanding these risks is an important part of evaluating an investment product.
Risk should not be viewed only in terms of whether an investment can lose value. Factors such as liquidity, inflation, interest rates, credit quality, and market movements can also affect an investment.
Common Types of Investment Risk
Market Risk
The value of market-linked investments may fluctuate because of economic conditions, corporate developments, interest rates, investor sentiment, and other market factors.
Credit Risk
Debt securities may carry the risk that an issuer could delay or fail to meet its payment obligations.
Interest Rate Risk
Changes in interest rates may affect the value of fixed-income securities and debt-oriented investments.
Liquidity Risk
Some investments may not be easily sold or converted into cash at the desired time or price.
Inflation Risk
Inflation can reduce the purchasing power of money over time.
Risk and Investment Horizon
The characteristics of a financial product should be considered alongside the period for which an individual expects to remain invested.
For mutual funds, investors can review the Risk-o-Meter and scheme documents to understand the indicated level of risk associated with a particular scheme.
Stay Informed
Before making an investment, review:
- Product features
- Associated risks
- Costs and charges
- Liquidity conditions
- Tax implications
- Applicable documentation
A clear understanding of these elements can support more informed investment decisions.
Disclaimer
Investments are subject to applicable market and product-specific risks. Investors should review relevant product documents and disclosures before investing.