Top 10 investment risks spelt out
Some of the top investment risks have been identified in a list compiled by accounting association CPA Australia, with inflation, legislative change, interest rates, currency and mismatch among those nominated in its top 10.
It defines inflation risk as the failure of cash and term deposits to keep pace with inflation, indicating a need to balance such investments with shares and property, which tend to keep pace with inflation.
Currency risk is described as the propensity for movements in currency to result in significant increases or decreases in the value of an investment, depending on which way the currency moves.
Interest rate risk is the risk inherent in upward interest rate movement, particularly for younger borrowers exposed to high levels of debt.
Mismatch refers to the risk of investment options that do not meet the individual needs of the investor.
Other risks listed among the top 10 were credit, market risk, gearing, market timing and liquidity.
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