Investment risks are not all visible

Investors need to take risks to achieve returns, but do you really understand what risk means? Dr Benjamin Holdsworth shows how risk is connected to your long-term objectives.

Orange boat buoy in the sea

Investors know that equity markets can be risky. The trouble is that ‘risky’ means different things to different people.

William Bernstein – a neurosurgeon-turned-adviser and prolific investment writer – wrote a great, short booklet on risk, where he explained the different risks that equity investors face, as follows:

‘Risk, then, comes in two flavours: “shallow risk”, a loss of real capital that recovers relatively quickly, say, within several years; and “deep risk”, a permanent loss of real capital.’

The content of this article is for information only and must not be considered as financial advice. Cavendish Medical always recommends that you seek independent financial advice before making any financial decisions. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor. The value of investments and the income from them can fluctuate and investors may get back less than the amount invested.