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Types of risk.

There are many different types of risk

For example, your pension may not be as big as you want or need it to be. It's important to make sure you know about what could happen to your money when you invest it, so here's some information about the different risks.

The amount you invest

The risk that you may not get back as much as you put in.

Investments generally go up and down in value, some types more than others. For example, share prices generally change daily.

Your investment goal(s)

Your investment may not give you the amount you'd like or need in the future.

You need to make sure you keep an eye on how your investment's doing. If it's off target you may need to invest more.

Income

Your investment may not give you the amount of income you'd like or need. This may be now or in the future.

For example, this is important if you need a particular amount of income from your pension.

Inflation

Your investment may not keep up with inflation. If it doesn't then this will reduce what you can buy.

Lost opportunity

Your investment may not do as well as where you had it before.

Accessibility

You may not be able to get your money as quickly as you need it.

It isn't always possible to cash in investments instantly. For example, property may take a long time to sell.

Timing when you buy and sell your investment

The value of individual investments can go up and down every day.

Also, investment types may generally rise or fall over longer periods due to economic conditions.

For example, rising inflation or interest rates. This means that you might buy or sell investments at what may turn out to be the wrong time.

It's not possible to know the future so you need to make sure you're happy with when you buy and sell.

Fund specific

The funds you choose have risks linked to what they invest in.

For example, a US equity fund takes investors' sterling to America and coverts it to US dollars to buy and sell company shares in US companies. It then converts the US dollars back into sterling when you get out of the fund. There's a currency risk depending on how many dollars you get to the pound.

You should make sure you understand the fund specific risks, and are willing to take them, before choosing a fund.

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