Beginners' guide to risk and investment goals

Risk and return on different types of investment

The chart below lists the four main investment asset types and, in ascending order, the risk involved with each.

Please note this graph is for illustrative purposes only.

As you can see, the greater the potential reward from an investment, the greater the risk that its value could fall.

 

For investments that carry a very low risk of you losing some or all of your money, often tend to give a very low return on your investment. For example, if you have money in a bank or building society account, your money is safe and readily available, but usually isn't earning high rates of interest. So this means that investments with potentially higher returns are often also higher risk. For example, investing in the stockmarket through equities could reward you with a high return, but the stockmarket could also fall and you could lose a large part or even all of your investment.

Bonds are generally lower risk than equities and property, although the risk of investing in bonds depends on the specific type of bond you invest in.

For more details of the different investment types, read our Beginners guide to Investments.