Is investing risky?

Investing is often described as “risky” – but that word gets used in an unhelpful way. It makes it sound like there’s a simple yes-or-no answer. In reality, investing risk isn’t about whether something is safe or unsafe. It’s about understanding what kind of uncertainty you’re signing up for, and over what period of time.

 

The first thing to understand is that investing does go up and down. That’s normal. The value of your investments won’t move in a straight line – some days, weeks, or even years can feel uncomfortable. This is called volatility, and a useful way to think about it is that occasional market volatility is the price you pay for access to long-term growth.

But here’s the most important part: volatility is not the same as losing money. You only lock in a loss if you sell when your investments are worth less than what you put in.

 

Here’s an example

Say you have a Stocks & Shares ISA and you’ve been paying in £50 a month for six months – £300 of your own money in total. The market has been doing well, and your pot has grown to £350: your £300, plus £50 in gains.

Then the market dips, and your pot has declined from £350 to £335 this month (but in more volatile circumstances this figure could be lower). While that might make me feel slightly worried, you haven’t actually lost any of your own money yet as long as you remain invested. The quantity of each investment you own hasn’t changed.

What it actually means is that the investments you’ve been buying consistently are now slightly cheaper than before. If you invest another £50 this month, you’ll be buying more of those same investments for the same price – which boosts the overall size of your portfolio.

The hardest part of investing is usually just starting. Opening a Stocks & Shares ISA takes minutes – less time than your morning commute. Start today.

If you stay invested, those down periods become part of a longer journey that has, historically, trended upwards over time for diversified investments. They can even present an opportunity to give your portfolio a boost.

The key word is time. The longer your time horizon, the more opportunity your investments have to recover from any dips – and the less impact short-term volatility tends to have on the overall outcome.

Ready to put your money to work? You could open a Stocks & Shares ISA before the kettle’s even boiled. Get started now.