Understanding Investment Risks vs. Returns

What does risk mean to you? It could be making certain business or personal decisions, skydiving, or even as simple as eating a new delicacy you haven’t tried before.

When we hear the word “risk”, we instantly become worried about what happens next, especially if it involves finances – no one really wants to lose money. It is important to understand the concept of risk to return and ensure that the right investment opportunities are what you should consider.

Risk and return are opposite concepts in the financial world. Risk-return shows that the more the potential returns, the higher the risk. However, risk does not always mean the possibility of losing your money, it could mean that investment outcomes could vary actual expectations. As you embark on your investment journey, it is key to examine and make calculated risks in order to minimise loss and reap returns that are consistent with your financial objectives.

Here are a few tips on what you need to know about risk vs return:

Learn the variety of risks in investments– This could be interest rate risk, which is a risk that arises from fluctuating interest rates; business risks, usually influenced from the profit or loss of a business; or dividend risk – which is basically a drop in share prices. Be sure to understand what level of risk applies to your investment to guide you in making an objective investment decision.

Diversify your assets- Diversification simply means investing in more than one industry or financial product so that all your eggs are not in one basket. This will help you spread your risks. By selecting different investments in various asset classes, you are reducing your exposure to risks.

You need a financial expert or risk advisor– A professional asset manager sets you on the right path to risk mitigation. They can help you evaluate, predict, and ascertain potential risks. They can identify high risk to high return products, low risk with minimal returns and more. Most importantly, an expert will show you the best ways to manage your risks.

At FBNQuest Asset Management you have a partner that can guide you on the journey to financial success. Through years of industry expertise and use of extensive financial research, they will guide you on all you need to understand about investment risks. For more tips on investing, tune into the Your Investment Navigator series which airs on Monday on Smooth 98.1 FM Lagos (6.40am) and on Tuesday on Raypower Network (8.30am). You can also listen to past episodes here.

Enjoy peace of mind when you invest with FBNQuest Asset Management today.

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