DIY Investor Magazine
/
March 2017
9
Investing involves risk, because returns are not
predictable since the value of investments and any
income from them may go down as well as up and
investors may not get back the full amount invested.
Some investments are more risky than others, with
greater volatility in annual returns.
Individuals have differing attitudes to risk. Some prefer
higher-risk equities, with the prospect of larger returns;
others prefer the lower risk in fixed income products.
But for all types of investment, overall risk can potentially
be reduced by diversification - spreading investments
over a range of different assets.
have to make do with defined contribution pensions.
These are disadvantages that millennials will find hard to
overcome.
But where they can match older generations is in the
area of saving, investing and risk management.
Wealth matters in both the short term and the longer
term; asset ownership is a source of stability and
reassurance. Wealth can be accumulated over time by
investing sensibly.
So what are the lessons in investment and risk that
millennials could learn?
First, it is prudent to save something, whenever and
whatever possible. Second, although saving in the form
of cash is risk-free (although inflation erodes its value) it
doesn’t provide much of a return.
Bigger returns can come from investing savings.
