Common types of risk with investment continued Interest rate risk Market risk This type of risk affects cash savings and inversely Market risk can affect all types of investment. affects bonds. Market risk is the risk of an entire market collapsing Bank and building societies will increase or decrease the rather than just an individual company. This could interest they pay on deposits in line with the Bank of happen as a result of an economic shock or a major England’s rates. So if interest rates are low, your cash institutional failure that triggers a chain reaction savings in a bank or building society may not grow affecting the entire market. very much. Generally, bond prices tend to move in the opposite direction to interest rates. When interest rates go up, the fixed payments offered by bonds look less attractive. But if interest rates are low, the fixed payments look more attractive and may be more than you might get from your bank or building society. 11