All investments – including saving in a cash deposit – carry some form of risk. It’s important to know what these risks are before you invest. Speak to a financial adviser to see which risks apply to your chosen investments and what level of risk is suitable for you.

You should also read our ‘Guide to Investment Risk’ before making the decision to invest.


1. Markets

Any investment that is traded on a market, including shares, bonds, property and commodities, can fall as well as rise in value, depending on investor demand. If an investment falls in value, there is a risk you may not get back the full amount you originally invested.

2. Income

The biggest risk from making investments is that the return paid out is not guaranteed. For instance, if you have shares in a company, the dividend they pay out every year will fluctuate depending on company performance and in certain years, they may not pay one at all. For this reason, if you are relying on stock-based investments to fund your retirement income you should only use them if you can tolerate some uncertainty.

3. Foreign exchange

If you hold investments denominated in overseas currencies – either directly or through an investment fund – you can see your returns reduced if those currencies weaken in value against sterling. On the other hand, if currencies are strong against sterling, returns can increase when converted back into British pounds.

4. Interest rates

Bonds which pay a fixed income, such as government gilts, are sensitive to changes in interest rates. If interest rates rise, bonds can see their market price fall because their fixed income payment looks less valuable, which can create losses for investors who choose to sell. But if rates fall, the value of a bond can rise.

5. Credit quality

Bonds are also exposed to credit risk. If the creditworthiness of the issuing company or government (and therefore its ability to meet the promised payments on a bond) deteriorates, the value of a bond can fall.

6. Inflation

Inflation is the trend for the price of goods and services to rise over time. If the return on an investment or savings deposit fails to keep pace this cost of living, your money will see its purchasing power, or ‘real’ value, decline.

7. Emerging markets

Developing markets such as those in Africa, Asia, Eastern Europe and Latin America, are often considered to carry higher levels of risk compared to mature markets such as the UK, US or Germany. This means that developing stock markets can be more volatile and are best considered a long-term investment within a well-diversified portfolio.

8. Liquidity

Certain investments are considered to be illiquid (difficult to sell or exchange for cash quickly without a substantial loss in value). To see a return or release money from an illiquid investment, you must be prepared to wait. For this reason, assets like commercial property are only suitable for investors who can take a long-term view.

9. Fund manager skill

Some investment funds rely on the skills of a single or small team of fund managers. If that manager or team leaves, performance of the fund may be affected. Certain funds are based on specific sectors or industries and are therefore liable to be impacted by events within that specific sector. Equally, an investment approach that performs well in some markets may not do well in others; therefore you need to be prepared for performance to fluctuate.

10. Tax

The tax treatment of investment wrappers like pensions and individual savings accounts, as well as personal tax allowances are subject to change by the UK government. In addition, investments that offer generous tax breaks now may not necessarily do so in the future. The tax rules can affect what your savings and investments will ultimately give you.

11. Charges

The charges on investment funds, pensions and other investment products are also subject to change. Charges will affect investment growth and what you ultimately get back from your investments so it’s important to understand what their impact on investment performance will be.

12. Investor protection

If an investment or deposit account is not covered under the UK’s Financial Services Compensation Scheme (FSCS), you may not have protection if the provider falls into financial difficulties. For this reason, you may wish to check whether your chosen investments are protected – particularly where an investment fund or scheme is based outside the UK. All deposit-takers featured in our cash panel are covered by the FSCS.

13. Overseas holdings

If you hold investments outside of the UK, due to local laws a third party nominee may not hold your investments in a way which is separately identifiable from investments of that third party or of us. In the event of their insolvency, if there is a shortfall in investments available to settle all claims, all of your investments may not be recovered, and you may share proportionately in accordance with all clients’ entitlements.