Managing risk Understanding Wherever you choose to put your money, there will be some level of risk involved. But risk is not necessarily a bad thing. It does mean Risk your investments could fall in value, and you may not get back your original investment, but higher risk also has the potential to produce greater returns. The important thing is to make sure you Risk describes the aren’t taking on any more risk than you need to. potential for losses For more information see our Spin-free guide to risk. Taking some risk is a part of investing There are strategies to help ensure you don’t Here are four strategies to help you manage risk: take more risk than you need to Invest in funds Diversify When you put your money in a fund, it is combined If you hold a blend of investments, they have the with investments from many other people. This potential to perform well, or badly, at different times, 1means it can be spread across a much wider range 2 which reduces the risk of your overall investment of investments than you could buy on your own – so falling significantly in value. One way to diversify you are less exposed to any one holding falling or your investments is to combine higher-risk funds rising in value. focusing on equities with lower-risk funds focusing on property, bonds or even cash. Invest for the long term Invest regularly Markets can drop suddenly at times, often in Investing on a regular basis (such as once a month) reaction to political or economic news. A long-term means you’ll make some investments when markets 3perspective shows that asset price fluctuations 4 are rising and some when they’re falling. This can tend to even out and, over a period of ten years help smooth out some of the ups and downs in the or more, history has shown that markets have markets’ performance. generally risen. 8