The risks involved in investment funds

The financial markets are subject to many influences, including from the worlds of politics and business. Investment funds are therefore affected by international events. The following factors have a significant influence on investment funds:

  • Price developments (e.g. share prices)
  • Interest rate situation
  • Currency
  • Market trends

These four factors can either affect the yield positively or – as risk factors – inhibit the performance of the fund.

Price risk

Investment funds are subject to the risk of falling unit prices. A fall in the price of the underlying securities held by the fund is reflected in a downward trend in the fund’s performance.

Interest rate risk

Depending on the investment focus of the fund, interest rate fluctuations may affect the fund’s performance. For example, if interest rates in the capital markets fall, the value of bonds and thus their market prices increase, and vice versa if interest rates rise. Interest rate risks can also affect share prices, but this effect is included in the price risk.

Currency risk

Investors are affected by currency risk if the investments are denominated in a foreign currency and the underlying exchange rate falls. Exchange rates are affected by various factors. In addition to the economic situation, a country’s rate of inflation and interest rate differences compared to other countries, other factors, such that psychological aspects, e.g. crises of confidence, can weaken a currency.

Market risk

Even the broad diversification of the fund’s assets may not prevent declining stock markets being reflected in the performance of investment funds. Equity funds are more affected by this than bond funds.

With investment solutions from Baloise Fund Invest, you can be sure that your money is in the hands of a successful asset manager. And even with small investments, you benefit from the expertise and strengths of Baloise Asset Management, the asset manager of the Baloise Group.

Your customer adviser will be happy to give you personal advice before you make an investment. In an advisory session, you jointly identify an investor profile appropriate to your current situation and your personal investment goals. Your customer adviser can then propose an investment solution that reflects your needs and possibilities.

Not yet convinced? Then take a look at the BFI video clip, “Baloise Fund Invest explains investment funds”. The video clip clearly demonstrates how investment funds work and explains the opportunities and risks they present.

In German