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Investment guide

Understanding investment vs risk


Markets by nature go through cycles, so it’s important to remember that ups and downs during the life of your investment is expected. As markets go through the motions, so will your account balance. The level of ups and downs in your account balance can be associated with the risk profile of the fund you’ve invested in. Watch the video below to understand what terms like risk and investment mean and how they work.

Higher risk funds, tend to be invested largely in growth assets (such as shares) and are generally associated with higher levels of ups and downs. Funds on the lower end of the risk scale often have a larger allocation of investments to income assets (such as cash and bonds) and therefore historically experience less ups and downs. The higher on the risk scale the fund you are invested in, the greater the potential for the value of the fund to fluctuate. However, they may potentially generate better returns over the long term when compared to a lower risk fund. Lower risk funds are known to typically provide more consistent but lower returns over the long term.

It is important to understand that no one can predict every event that may affect investments, and that all investments carry some level of risk. Understanding what level of risk you feel comfortable with is also known as your risk appetite and is key in navigating your investment options.

The level of risk associated with your chosen fund(s) can provide you with insight into the typical levels of ups and downs you could expect to see in your balance. In any fund you may invest into, the value of that fund may rise and fall, and returns may be negative from time to time.

At AMP we have a range of investment options, giving you the flexibility and ability to make the right investment choice for you. Because everyone's needs are different, you should always seek financial advice or other professional advice relevant to your personal financial situation. For financial advice, we recommend you contact your Adviser. If you don’t have an Adviser, contact us on 0800 267 5494 or find an adviser online.