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Fundamental Risks All strategies have risks. After all, you don't get returns for taking on zerorisk. The key is to understand them and be sure they are worth taking.Here are some key risks: Investment risk ' is the variability of returns and the chance that your investment will return less than you expect, or your investment makes a loss leaving you with less capital than when you started, or your investment doesn't even keep up with inflation meaning it is worth less over time.' Volatility ' is the relative rate at which the price of an investment moves up or down.Generally, the higher the potential returns, the greater the risk. The smaller the potential risks, the lower the returns.RISK/RETURN TRADE-OFFSuccessful investors understand the risk and return characteristics of their investments and their own ' risk profile '. For more information about understanding your ' risk profile ', click here.Different investors will weight their portfolios in different ways, depending on their investment goals and ' risk profile '. An investor who is aiming for capital growth over the long term, and who has the capacity to tolerate greater volatility and fluctuations in the value of their investments, may choose to include more higher risk/higher return investments than an investor who relies on their investments for a regular income. For example, shares in a speculative mining company may be quite volatile, with the share price moving considerably over a short period of time. On the other hand, residential property is usually less volatile, with property prices moving more gradually over a longer period of time.
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