Investment Risks

Introduction

Every investment carries some degree of risk. Understanding these risks before you invest is essential to making informed decisions and managing your portfolio effectively.

Market Risk

Market risk is the possibility that the overall market declines, affecting the value of your investments regardless of individual company performance. Economic downturns, geopolitical events, and changes in interest rates can all trigger broad market declines.

Diversification across asset classes and sectors can help reduce market risk, but cannot eliminate it entirely.

Liquidity Risk

Liquidity risk refers to the difficulty of selling an investment quickly at a fair price. This is particularly relevant for private market investments, newly listed shares, and smaller companies with lower trading volumes.

In IPOs specifically, lock-up periods may prevent insiders from selling shares for a set period after listing, and allocation sizes may be smaller than requested.

Concentration Risk

Concentration risk arises when a disproportionate share of your portfolio is invested in a single company, sector, or asset class. A concentrated position means the performance of one investment can have an outsized impact on your overall returns.

• Spread investments across different sectors and asset types
• Avoid allocating more than 10% of your portfolio to any single position
• Consider your overall asset allocation, not just individual investments

Volatility Risk

Newly listed shares can experience significant price swings in their early trading days. This volatility is driven by limited trading history, shifting investor sentiment, and the transition from private to public valuation metrics.

Be prepared for short-term price fluctuations and invest with a time horizon that matches your risk tolerance.