Risk Warning
Important risks associated with financial products covered on Capmap.
Table of contents
General investment risk
All investments carry the risk of loss. Your capital is at risk. There are no guaranteed returns. Market conditions can change rapidly, and the value of your investments can go down as well as up. You may receive back less than you originally invested.
Stocks and ETFs
- Market risk: stock and ETF prices fluctuate based on market conditions, economic events, and company performance. Declines can be sudden and significant.
- Currency risk: investments denominated in a foreign currency are subject to exchange rate fluctuations that can increase or reduce returns.
- Liquidity risk: some securities may be difficult to sell quickly at a fair price, particularly in stressed market conditions or for smaller companies.
Cryptocurrency
- Extreme volatility: cryptocurrency prices can move dramatically in short periods. Losses of 50% or more in a single day have occurred historically.
- Regulatory uncertainty: the regulatory environment for crypto assets varies by country and is evolving. Regulatory changes can significantly affect the value and legality of holdings.
- Exchange risk: cryptocurrency exchanges can be hacked, become insolvent, or freeze withdrawals. Not all exchanges are regulated or insured.
- Wallet security: loss of private keys or seed phrases results in permanent, irrecoverable loss of assets.
- Potential total loss: individual cryptocurrencies can and do lose their entire value. Investing in crypto carries a real risk of total loss.
P2P lending and crowdfunding
- Default risk: borrowers may fail to repay loans. Even with buyback guarantees, the guaranteeing entity may itself default.
- Platform risk: P2P platforms are not banks and are not covered by deposit guarantee schemes. If a platform fails, recovering your investment may be difficult or impossible.
- Illiquidity: investments may be locked for the duration of the loan term. Secondary markets, where available, may not provide full liquidity.
- No deposit guarantee: unlike bank deposits, P2P investments are not protected by the European Deposit Insurance Scheme or national equivalents.
Real estate investments
- Market cycles: property values are subject to market cycles and can decline significantly during downturns.
- Illiquidity: real estate investments, including crowdfunding, are typically illiquid. Selling may take months or years.
- Leverage risk: many real estate investments use borrowed money, which amplifies both gains and losses.
Mortgages
- Interest rate changes: variable-rate mortgages can become significantly more expensive if interest rates rise.
- Negative equity: if property values fall, you may owe more than your property is worth.
- Repayment obligations: failure to make mortgage payments can result in foreclosure and loss of your home.
Insurance
- Underinsurance: insufficient coverage can leave you exposed to significant financial loss.
- Coverage gaps: policies have exclusions and limitations. Review policy documents carefully to understand what is and is not covered.
- Policy exclusions: pre-existing conditions, specific activities, or certain events may not be covered. Claims can be denied if conditions are not met.
Pension
- Regulatory changes: pension rules, retirement ages, and tax treatment can change over time, potentially affecting your retirement benefits.
- Longevity risk: you may live longer than your pension savings can support.
- Inflation risk: inflation can erode the purchasing power of fixed pension benefits over time.
Currency risk
For cross-border investments or accounts held in foreign currencies, exchange rate fluctuations can increase or reduce the value of your holdings when converted to your home currency. Currency movements can be significant and unpredictable.
Tax risk
Tax treatment of investments, savings, and financial products depends on your individual circumstances, country of residence, and applicable treaties. Tax rules can and do change. What is tax-advantaged today may not be tomorrow. Always consult a tax professional.
This is not exhaustive
This page does not cover all possible risks associated with financial products and services. Each product and situation carries unique risks. You should carefully consider your own risk tolerance, financial situation, and investment objectives before making any financial decisions.
When in doubt, consult a qualified financial professional. See our Financial Disclaimer for more information.
Contact
Questions about risk disclosures: hello@capmap.eu