StashLearn
Financial education, no lectures.

Follow and listen to our podcast

Get the app
Teach MeMoney NewsMoney TalkStash
Get the app

Join millions of investors on Stash

Investing, simplified

Start today with as little as $5
Get the app
Stash

Investment Risk: What It Is and How to Manage It

February 08, 2017

You might be familiar with risk in your personal or professional life – but what does risk mean for your investments?  

2 min read

We take risks every day of our lives. Whether it’s crossing the street, stepping on a crack, or negotiating a salary increase; risk plays a key role in our daily decisions.

If you’re willing to take the risk of asking for a higher salary, you’re probably weighing the risk of your request with the potential reward. (That’s called risk management.) You might be familiar with risk in your personal or professional life – but what does risk mean for your investments?  

What is investment risk?

Investment risk is the uncertainty of your investment’s future returns. This includes the possibility that your future return may not match the expected return. And this mis-matching of expectation and reality could negatively affect your financial welfare.

In other words, the performance of your investment may not be as successful as you hope. If you invest $100 every month, with the goal of a $7 (7%) return, you run the risk that the return on investment may be lower (or even a negative). But remember! A low expected return in the short term shouldn’t stop you from thinking long term.

Risk and investing in ETFs

Stash investments are categorized by risk level. And when it comes to foundational investments, Stash offers diversified mixes.

Each mix has a certain ratio of stocks to bonds. A greater allocation to stocks generally makes an investment more aggressive, just as a greater allocation to bonds generally makes an investment more conservative. What’s your mix? It’s all about figuring out your own taste for risk.

Risk management: How does it relate to your Stash?

Remember those personal questions we ask you in sign-up about your age and income? We’re not just asking you because we are curious. All of this information helps us diagnose your risk profile. This is based on your financial situation and investing goals.

A risk profile combines the amount of risk you are willing to take and the amount of risk you are able to take, based on those inquisitive sign-up questions. We place investors into a conservative, moderate, or aggressive risk level, and we make available suitable investments to match. 

If you’re risk averse (aka you’re not down for that risky investing business), you may be sorted into a conservative or moderate risk level. It’s also important to note that Stash won’t show you investments that don’t match your risk level.

We take our fiduciary responsibility seriously and want you to invest according to not only your beliefs and goals, but also in a responsible way that keeps the long term in mind.

Investing, simplified

Start today with as little as $5

Get the App

By Anneliese Klein-Pineda

Next for you
Many Americans Say Not Saving and Investing Are Top Regrets

Investment Profile

Blue Chips

Invest in some of America’s largest and most established companies.

Learn more
Explore more articlesChoose a topic to learn more about
pop culture social media market news Retirement Careers
Disclaimers

This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Before investing, please carefully consider your willingness to take on risk and your financial ability to afford investment losses when deciding how much individual security exposure to have in your investment portfolio.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit www.stashinvest.com/disclosures.