Skip to content

Viac Academy

What are the risks with securities?

The aim of an investment in pension funds is always to preserve or increase the assets invested. On the other hand, an investment in the capital markets is always associated with various risks. In this way, the value of pension assets can fall or rise. As a rule of thumb, the higher the expected return (the more stocks), the higher the associated risks (the greater the fluctuations). In the implementation process, we strive to minimize the risks for each client. Implementation by means of index funds and ETFs is, for example, much more diversified than implementation by means of individual securities.

The most important risks include the following: Price risk, exchange rate risk, counterparty risk, securities lending, interest rate risk and various general economic risks such as inflation, economic activity or geopolitical risks.

In the long term, most risks lead to more or less temporary fluctuations. The strength of the fluctuations is largely determined by the equity component. Therefore, those who choose a strategy with a high equity component and thus a high expected return will consciously accept larger fluctuations and thus also temporary price losses.

The chart shows how differently a portfolio of CHF 100 develops depending on the equity component. The greater the proportion of equities, the stronger the fluctuations. In phases of the upswing, the appreciation in value increases with an increasing proportion of equities. Conversely, the reduction in value in economic crises (green background) increases with increasing equity component.