RiskanditsimpactonyourinvestmentsENFINAL.pdfVIP

Risk and its impact on your investments All investments carry some degree of risk. All investments, such as stocks, bonds, mutual funds and exchange-traded funds, can lose some or even all their value if market conditions change. It is important to understand the types of risk that may impact your investment returns before determining and implementing your investment strategy. Types of Risk There are many different types of risk. Some of these may include: • Market risk - the risk that your investments are • Product risk – the inherent risk associated with subject to a general market decline in response to different investment products. For example, stocks changing domestic or global economic conditions. generally carry a higher level of risk than bonds. These market-wide changes can be unpredictable • Business risk – the risks associated with the and beyond anyone’s ability to forecast. underlying business of a particular investment, such • Liquidity risk - the risk that a particular investment as labour difficulties or competition, which can affect cannot be traded quickly enough in the market to a company’s profitability and value. prevent a loss (or make the planned profit). • Foreign exchange risk – the risk that foreign • Inflation risk - the risk that the value of your currency denominated investments in your portfolio portfolio does not increase to keep up with the rate are affected by fluctuations in foreign exchange of inflation. rates. How much risk are you willing and able to take? There are two things you should consider when greater returns; however, the