Confused about investing? Here’s a simple explanation of how it works, why it can be so rewarding, and how to manage the potential risk.

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Investing and Risk | Fidelity Investments

Investing can be a great way to grow your wealth over time, but it also involves some level of risk. The key to successful investing is to understand the risks involved and to weigh them against the potential rewards. In this article, we’ll take a look at the different types of investment risks and provide tips for managing them.

Types of Investment Risks

There are a few different types of investment risks, including:

1. Market Risk: The risk that your investment will decline in value due to overall market conditions, such as an economic downturn or a stock market crash.

2. Interest Rate Risk: The risk that changes in interest rates will impact the value of your investment, such as a rise in rates that lowers the value of bonds or a drop in rates that reduces the interest income from your savings.

3. Credit Risk: The risk that the issuer of a bond or other debt security will default on its payments.

4. Inflation Risk: The risk that inflation will erode the purchasing power of your investment, causing it to be worth less over time.

5. Liquidity Risk: The risk that you may not be able to sell your investment when you need to, such as during a market downturn.

Managing Investment Risks

While some level of risk is inherent in investing, there are steps you can take to minimize your risk and improve your chances of success. Here are a few key strategies:

1. Diversify Your Investments: One of the best ways to manage risk is to diversify your portfolio across different types of investments, industries, and asset classes. This can help reduce your exposure to any one company or market.

2. Invest for the Long-Term: Investing for the long-term can help smooth out short-term market volatility and reduce the impact of market downturns.

3. Stay Informed: Stay up-to-date on market news, economic data, and other factors that could impact your investments. This can help you make informed investment decisions.

4. Use Professional Help: Working with a financial advisor can help you develop a solid investment plan that takes into account your risk tolerance, goals, and other individual factors.

Fidelity Investments: Helping You Manage Your Risks

At Fidelity Investments, we’re committed to helping you manage your investment risks and achieve your financial goals. Our team of experienced financial advisors can help you develop a diversified investment strategy that aligns with your goals, risk tolerance, and time horizon. We also provide a wide range of educational resources, tools, and products that can help you invest with confidence. To learn more, visit fidelity.com today.

Conclusion

Investing comes with some level of risk, but with a little knowledge and planning, you can manage your risks and achieve your financial goals. By diversifying your investments, investing for the long-term, staying informed, and seeking professional help, you can reduce your exposure to market volatility and increase your chances of success. At Fidelity Investments, we’re here to help you navigate the world of investing and achieve your financial dreams.