Finance glossary
Risk
Also known as: Investment risk, Capital at risk
In simple terms
In investing, risk is the chance that your money falls in value or that you get back less than you put in. Generally, the higher the potential return, the higher the risk.
On this page
What does risk mean?
Investment risk is the possibility that things do not go as hoped — that the value of what you hold drops, that returns are lower than expected, or that you get back less than you invested. Almost every investment carries some risk; this is what “capital at risk” means.
Risk is the trade-off for potential reward. Cash savings are low risk but tend to grow slowly; shares and other investments offer higher potential returns precisely because their value can fall as well as rise.
How risk works
Different investments carry different levels and types of risk — a single company’s shares are riskier than a broad fund, and there is also the risk that inflation erodes the value of cash left uninvested. Spreading money across investments (diversification) and investing for the long term are the main ways to manage risk.
No investment is entirely risk-free, and higher promised returns almost always mean higher risk. Anything advertising high, guaranteed returns with no risk should be treated as a serious warning sign, and the firm checked on the FCA register.
How could this affect me?
How much risk to take depends on your goals, how long you can invest, and how much loss you could cope with — both financially and emotionally. Money you might need within a few years generally should not be exposed to high investment risk.
Understanding your own attitude to risk helps you build a portfolio you can stick with through the falls as well as the rises. Because your capital is at risk, only invest money you can afford to leave alone, and never money you cannot afford to lose.
Things to watch out for
- All investments can fall in value — you may get back less than you invested.
- Higher potential returns always mean higher risk; “high return, no risk” is a red flag.
- Cash is not risk-free either — inflation can erode its buying power over time.
- Past performance is not a guide to future returns.
Know your rights
- FCA rules require firms to communicate investment risk clearly and to make sure a product or advice is suitable for retail investors; promotions must be clear, fair and not misleading.
- If an authorised UK firm fails, FSCS may protect eligible investments up to £85,000 — this protects against the firm failing, not against your investments falling in value.
- If you are badly advised or mis-sold an investment, you can complain and escalate to the Financial Ombudsman Service.
General information, not personal advice
Consumer Credit is an independent information service. We do not provide regulated financial advice or sell financial products. For advice on your own situation, speak to an appropriately authorised firm or a free service such as MoneyHelper. About Consumer Credit.
Sources
We checked this page against these official and authoritative sources.
- FCA, Investing basics — understanding risk (opens in a new tab). Accessed 22 Aug 2026.
- MoneyHelper, The risks and rewards of investing (opens in a new tab). Accessed 22 Aug 2026.