How You Can Mitigate the Different Types of Risk in Your Portfolio When you invest your money, you probably know you’re taking on a certain amount of financial risk. Unlike depositing money in a bank, where it is often insured and can earn a steady amount of interest, investing doesn’t offer financial certainties. You could earn a great deal of money on your investments, but you also face the risk of losing money.
In general, the more financial risk you’re willing to take on in an investment, the greater your chance of potentially earning higher returns. Higher financial risk will also increase the losses you might face on your investments. However, investors also face risks they don’t necessarily get to choose when they’re selecting investments. “Market risk” is one of those.