Risk versus The more risk you take, the more your investment has the potential to grow. There are no certainties with investments, so taking a higher risk does not guarantee reward a higher return and you may not get back your original investment (known as the capital). The risk/reward ratio explained Be wary of stockmarket The illustration below shows how risk can affect your fluctuations investment. If you choose a low-risk investment, the It’s important to remember that no investment is initial sum invested is not expected to grow very much. guaranteed – the stockmarket will fluctuate so your But if you choose a higher risk investment, your initial investment may not grow as predicted and you may not sum could grow considerably. get back your original sum (capital). Risk is the possibility of losing some, or all, of your capital (your original investment). Risk refers to uncertainty. All investments carry a level of risk. 4