What are the risks of investing in the stock market?
nsave makes investing accessible; our investment feature is our in-app solution that allows you to invest your money in shares and funds. But accessibility isn’t just about entry—it’s about ensuring everyone understands the risks involved in putting their money into the stock market. In this blog, we’ll break down the key risks you should know before you invest.
Every investment comes with a certain level of risk. This type of risk can negatively impact your financial welfare1.
Losing the value of your investments
One of the primary risks of investing is the possibility of losing your invested money. The value of investments can fluctuate due to factors beyond your control—like economic changes, market shifts, or company performance. Unlike money kept in a safeguarded account, investments follow the trends of the market. Global events and political developments can cause sudden market swings, meaning the money you invest today could be worth less tomorrow. If you need to withdraw your funds during a downturn, you might have to sell at a loss. Make sure that you can afford to lose some of the value of your investments.
A practical rule of thumb for investing
Imagine you have £100, and you need to pay an electricity bill of £100 bill by the end of the week. Investing that £100 might seem like an opportunity to make a quick profit. But what if the investment's value drops? You could find yourself short on funds when the bill is due.
The takeaway? Don't invest all of the money that you'll need in the short term2. Before you start investing, it's wise to set aside an emergency cash fund3. Having a financial cushion means you're prepared for life's ups and downs and surprise bills. Only invest funds that aren't kept for essential expenses or emergencies. This way, if the investment doesn't perform as expected, your day-to-day life remains unaffected3.
Learning how to manage your investment risk
Your money is at risk whenever you invest - however, there are varying levels of risks involved depending on what type of shares, funds, or commodities you choose to invest in. In simple terms, the possibility of earning higher returns on an investment usually means taking on more risk. So, the more money you might make, the greater the chance you could lose money too1.
Finding the right investment with nsave
Different types of investments come with different levels of risk, and knowing about them can help you make smarter choices. nsave’s investment feature offers a variety of opportunities to allow you to match your investments to your appetite for risk and rewards. Learn more about the different assets you can invest in with nsave.
Not sure if investing is the right fit for you? That’s okay. With nsave, you can keep your funds in our safeguarded accounts, fully protected and always accessible. No risks, no stress—just peace of mind. Read more about how our safeguarded accounts can help look after your money.
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Sources last updated: 14-Nov-2024
This article is for informational purposes only and does not constitute financial advice. Investments involve risks, including the potential loss of capital. Past performance is not indicative of future results. Each investor is responsible for making their own decisions and should seek advice from a licensed financial advisor or qualified professional if uncertain.
