Investment Risk Management

Whenever you make a decision – in everyday life or in investment – you face an element of risk. But if you understand the risks, you can begin to manage and minimise them. 

The value of the fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested. 

Risk is part and parcel of investing, and as such cannot be avoided. We don’t give financial advice, so you should speak to a financial adviser if you need help deciding if an investment is right for you.

There are four key ways in which you can manage your investment risk:

1. Invest in funds

A fund is managed by a fund manager who will invest your money across different companies, sectors and/or regions according to the investment objectives of the fund. 

Holding a well-diversified, carefully chosen portfolio of securities can help to reduce investment risk.

2. Diversify

A balanced portfolio is made up of a mix of investments.

You might want to build a portfolio that includes higher-risk investments such as equities, together with lower-risk ones like bonds, property or even cash.

This is because different types of investment respond differently to the prevailing economic situation and will rise or fall in value at different times and at different rates. So asset class diversification can help to make your portfolio’s performance more consistent.

The balance within your own portfolio will depend on your attitude to risk, your age and your financial goals.

Take a look at M&G’s range of funds and asset classes to find out more.

3. Invest for the long term

It’s sensible to plan to invest for five years minimum.

This is because financial markets can experience short-term turbulence, brought on by a specific event or sometimes simply erratic investor behaviour, and it can take time for them to balance out again.

Markets will fluctuate over the short term but, over the longer term, the peaks and troughs may be smoothed out. It should be noted though, that there is no guarantee that this will always be true in the future.

4. Invest regularly

Investing at regular intervals can also be a good idea.

This is because financial markets can experience short-term turbulence and it can take time for them to balance out again.

Buying regularly means that the average price you pay can be lower than if you’d made one lump‑sum investment. Over time, regular investments can help smooth out the peaks and troughs.

Regular investing is easy with M&G. Just set up a regular investment by Direct Debit.

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