Managing investment risk

Focus on the key principles

Volatility in financial markets can affect investor and consumer confidence. In times of market uncertainty and increased volatility it's important to remember the key principles of risk management for your investments:

  • Diversification - As always, investors should consider holding a diversified portfolio that is in line with their risk profile.  A diversified portfolio will mean you are less exposed to a single economic event or geographic region. Diversification within and across asset classes and industry sectors is important, as is geographic diversification. A well-diversified portfolio allows a fall in the value of some investments such as international holdings to be offset by an increase in the value of other assets. Learn more about diversification.
  • Focus on your investment goals - Short term volatility in financial markets may be unsettling but over the long term you should be able to ride out these ups and downs. Short term volatility isn't a reason to panic and sell your investments. Where relevant, it's important to focus on your long term investment goals, especially for retirement planning.
  • Monitor your investments - Make sure you keep track of what your money is invested in and monitor your portfolio's performance. This can help you understand and manage the risks of your investments and ensure your overall investment goals are on track. If necessary, you may need to rebalance your portfolio from time to time so it remains in line with your risk profile. Learn more about keeping track of your investments.
  • Consider financial advice - If you need assistance with developing a financial plan or selecting financial products that are appropriate for your risk appetite, it can help to seek professional financial advice.
  • Beware of scams - When markets are volatile scammers try to take advantage of investors. Find out how to avoid investment scams.

In times of uncertainty and increased volatility make sure you remember the key principles of risk management for your investments.

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Last updated: 17 Jan 2018