Demystifying the risk of investing - part 1

I am on a mission to get 1 million women investing, here’s why.

According to Wealthify, 60% of women 18 – 54 say they would like to start investing, however, 77% of women say they are not confident with investing.

Intrigued by this, I conducted a survey amongst my ladies' network to find out what was holding women back from investing. The overwhelming response was they:

  • Don’t know where to start.

  • Don’t understand investments.

  • Find the risks of investing too risky.

Often, when we think of investing we wrongly compare it to GAMBLING. The reality of investing is not the same as going to a casino and placing a bet. If your casino bet fails you are certain to lose your money.

There are risks you face as an investor that should be understood but, importantly, managed in line with your personal attitude to investing.

A friend of mine, Adam Brewer, investment manager at Investec has written a brilliant short article about the psychology of investing which I recommend reading. Adam brings to life 'Why do people save instead of invest?’. Within his article, the power of time is illustrated well. You can see the importance of leaving your money invested over the medium to long term. Time is a resource you have to manage investment risk.

Adam is a founding member of my Facebook community Focus, Finance, Freedom (link to my community is below), and is equally as passionate about helping women understand the drawbacks of staying in cash vs investing.

Through a series of blogs, I want to ‘Demystify The Risks Of Investing.

The biggest fear that most women have when it comes to investing is losing their money.

Let’s talk about investment risk.

You are unlikely to buy a single company’s shares when you invest. Instead, you are more likely to hold a portfolio of different investments. When you do this, every single investment you own would need to fail for you to lose all of your money, which is highly unlikely.

If a company or organisation goes bust you could lose some or all of the money that is invested in that particular company. This is known as default risk.

If a single investment in your portfolio does fail, as part of a diverse portfolio, the loss will be offset by the performance of all the other investments you own.

Volatility is the main risk you face as an investor

The day-to-day movement, up and down, of the price of your investments, is known as volatility. It is the volatility of your investments that creates uncertainty.

However, volatility tends to be a short-term risk, because typically, over time, history shows us that the global stock market has made a positive return for investors.

You only crystallise a loss if you sell your investment when the price has fallen. It is important to let your investment ride out the bumps it hits along the way.

Fundamentally, when you set up an investment, you need to be prepared to give your investment the time it needs to grow.

As demonstrated in Adam’s article, based on the performance of the global stock market over the last 50 years if you invest:

  • for one day you have a 50% chance of a positive return.

  • for one year you have a 77% chance of a positive return.

  • for five years you to an 88% chance of a positive return.

  • for 10 years you to a 96% chance of a positive return.

  • Over 13+ years there has never been a loss.

In order to manage volatility, and create more certainty of positive returns, you can do two things:

  1. Leave your investment in place for the longer, giving your investment time to grow.

  2. Hold a portfolio of lots of different types of investments such as shares, bonds (a loan to a company), commodities (gold and oil), property, and cash. Different types of investments behave differently from each other. By having a mixture of investments the volatility of your portfolio overall should reduce.

The good news is that when you invest you don’t have to create your own portfolio or be the expert. You can choose to invest in a managed fund that is ready-made for you to start your investment journey.

Join me next time when I will tell you about the elephant in the room, inflation risk.

How to get in touch

If you would like to learn more about investing, as a financial coach, I can help you to understand more about your money and help you to invest with confidence.

Email me at to arrange a discovery call.

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