The risks of investing

Investing can be rewarding but it is not without risk. Before you start, there are a number of factors to consider.

The risks

When a company you invest in performs well, and the demand for its shares increases, you can generally expect the value of your investment to rise. On the other hand, should the company's performance decline, the shares that you hold can decrease in value or maybe even become worthless. In other words, buying shares in a company is committing to sharing both its profits and losses. Always keep in mind that all investing carries a certain degree of risk, which can result in the loss of your whole deposit, and, depending on the nature of the product, perhaps even more. Below you can read more about six different types of risk that you should consider when investing.

Market risk

Market risk

Market risk correlates with the macroeconomic environment. Factors such as tax reforms, law and regulation, and global changes could impact your investments. When the overall performance of the financial markets decreases, or if there is disappointing growth, it is possible that there will be negative consequences for companies. As a result, the value of companies can fluctuate. Sentiment also plays a part in market risk. When overall confidence in the market decreases, your investments are therefore likely to decrease in value.

Price risk

Price risk

The value of your investments is likely to fluctuate on a continuous basis. As an investor, you are therefore subject to price risk. Spreading your investments can partly reduce this risk.

Interest risk

Interest risk

Changes in the interest rate directly impact the value of bonds. If interest rates rise, bond prices typically go down. The impact of the change is dependent on the maturity date, where a longer maturity date often leads to a larger decrease in value. There can also be an indirect effect on other financial products such as stocks. If the market interest rate rises, it becomes more expensive to borrow money. This can lead to a reduction in consumption and higher interest charges for companies. In turn, the value of stocks could be negatively affected.

Credit risk

Credit risk

Credit risk is the risk that the company, state, or country in which you invest in cannot meet its payment obligations. With bonds, this would mean that interest will not be paid to the bondholders. Your investment will decrease in value or, in the worst case, will no longer be tradeable.

Market liquidity risk

Market liquidity risk

Market liquidity refers to the ease with which products can be bought or sold on the market. In cases where there are very few buyers for a product, selling can lead to the price being driven down. Typical indicators of this are a wide bid ask spread or very low trading volumes.

Currency risk

Currency risk

You are exposed to this risk when you invest with a currency other than your home currency. You will receive less for your investments if the currency you invested in decreases in value compared to your home currency.

getting started

Getting started

It all starts with thinking about what kind of investor you want to be. Decide on the risk level that you are willing to take and what types of products are best suited to reach your goals. It is advisable to never invest money you need now or enter into positions which could cause financial difficulties. Also, we recommend that you stick to what you know – in other words, investing in products you are familiar with will help you handle your investments with more confidence. To learn more about the basics of investing please see our Knowledge Centre. For more information about the risks of investing, we invite you to read our Investment Services Information document Characteristics and risks of Financial Instruments.

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Note:
Investing involves risks. You can lose your invested funds. We advise you to only invest in financial products which match your knowledge and experience. This is not investment advice.

Investing places your capital at risk. Read our full warning here.

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This communication is issued on behalf of flatexDEGIRO Bank AG and has been approved as a financial promotion on 3rd August 2023, for the purposes of section 21 of the Financial Services Market Act 2000 (FSMA), by Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority (FRN:574048). flatexDEGIRO Bank AG is an overseas firm which is not authorised by the Financial Conduct Authority. This means that the FCA Rules made under FSMA for the protection of retail clients do not apply to the services provided by flatexDEGIRO Bank AG but investors are instead protected under applicable German law and Dutch law rules that apply to flatexDEGIRO Bank AG. Investors are not protected by the UK Financial Services Compensation Scheme.

flatexDEGIRO Bank Dutch Branch, a foreign branch of flatexDEGIRO Bank AG | Amstelplein 1, 1096HA Amsterdam | phone: +31 20 261 3072 | e-mail: clients@degiro.com | flatexDEGIRO Bank Dutch Branch is registered with the Dutch Chamber of Commerce under number 82510245. | flatexDEGIRO Bank Dutch Branch, trading under the name DEGIRO, is the Dutch branch of flatexDEGIRO Bank AG. flatexDEGIRO Bank AG is an overseas company primarily supervised by the German financial regulator (BaFin). In the Netherlands, flatexDEGIRO Bank Dutch Branch is registered with DNB and supervised by AFM and DNB. | flatexDEGIRO Bank AG is a licensed German bank supervised by the German financial regulator and registered with the German Chamber of Commerce under number HRB 105687.

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Terms and conditions for the £100 transaction fees offer

If you activate your DEGIRO investment account before the 1 August 2024, DEGIRO will reimburse your transaction fees up to £100. The following conditions apply to this offer:

  • The offer is valid until (including) 31 July 2024.
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  • The first transaction costs (commission and external handling fees) up to £100 within the timeframe until 31 August 2024 will be reimbursed.
  • Currency handling fees (Auto FX trader) are not eligible to be refunded with this promotion.
  • We will reimburse the transaction costs and external handling fees you have spent (up to a maximum of £100) to your DEGIRO account in early September 2024.
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  • To be eligible for this offer, the new client needs to make a first deposit to validate the account (minimum deposit is £0.01) and activate their DEGIRO account.
  • New clients who started their registration before the offer period, but activate their DEGIRO account during the offer period, are also eligible for this offer.
  • If an existing account is already linked to the address of the new client, participation is excluded.
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  • The transaction fees and handling costs are converted and reimbursed in GBP even if they are charged in EUR. The amount that will be reimbursed in GBP is calculated based on the currency exchange rate applicable on the day of reimbursement.
  • Dutch law is applicable to this promotion.

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By participating in the offer, the client automatically accepts the offer conditions and terms. DEGIRO may terminate the campaign prematurely or change the campaign conditions. DEGIRO will communicate any changes via the website.

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Participation in the offer is open to all clients who have activated an account at DEGIRO on or before the 31 July 2024.

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