How to manage your investing risk
Investing comes with its own set of risks. Here's a practical guide to risk management tips, tools and techniques when buying and selling stocks and ETFs.
How can I manage my risk when investing?
What is meant by “risk” in investing?
There are risks involved when investing. That's because all investment activities carry a certain level of uncertainty, and this is something you must give careful consideration prior to committing capital. These are some of the risks you should consider carefully and how you could manage them:
The risk |
Why it happens |
Ways we help |
| Market risk | The entire market can be affected by economic conditions, interest rates or geopolitical events, causing widespread price movements that impact your holdings | Access to research, news and analysis to help you understand market conditions and make informed decisions |
| Company-specific risk | Individual companies face unique challenges – poor management decisions, competitive pressures or industry disruption - that can negatively impact their share price and your investment | Real-time news feeds, analyst research and company reports to keep you informed about developments affecting your holdings |
| Price volatility | Share prices can move sharply and unpredictably, sometimes making it difficult to buy or sell at the price you expect | Use limit orders to set your preferred buy or sell prices, giving you more control over execution even in volatile markets |
| Concentration risk | Putting too much capital into one company or sector means your entire portfolio could suffer if that area performs poorly | Access to thousands of stocks and ETFs across global markets to help you diversify if you choose to |
| Liquidity risk | Some stocks trade infrequently, making it difficult to buy or sell quickly without affecting the price | Access to stocks across major global markets with high trading volumes, plus research tools to help you understand liquidity before investing |
| Currency risk | When you invest in foreign stocks, currency movements can impact your returns - even if the share price rises in its local currency, you might lose money if that currency weakens against the dollar | Access to stocks across multiple currencies and regions, allowing you to spread currency exposure if this aligns with your investment approach |
The risk |
Why it happens |
Ways we help |
| Market risk | Why it happens: The entire market can be affected by economic conditions, interest rates or geopolitical events, causing widespread price movements that impact your holdings |
Ways we help: Access to research, news and analysis to help you understand market conditions and make informed decisions |
| Company-specific risk | Why it happens: Individual companies face unique challenges – poor management decisions, competitive pressures or industry disruption - that can negatively impact their share price and your investment |
Ways we help: Real-time news feeds, analyst research and company reports to keep you informed about developments affecting your holdings |
| Price volatility | Why it happens: Share prices can move sharply and unpredictably, sometimes making it difficult to buy or sell at the price you expect |
Ways we help: Use limit orders to set your preferred buy or sell prices, giving you more control over execution even in volatile markets |
| Concentration risk | Why it happens: Putting too much capital into one company or sector means your entire portfolio could suffer if that area performs poorly |
Ways we help: Access to thousands of stocks and ETFs across global markets to help you diversify if you choose to |
| Liquidity risk | Why it happens: Some stocks trade infrequently, making it difficult to buy or sell quickly without affecting the price |
Ways we help: Access to stocks across major global markets with high trading volumes, plus research tools to help you understand liquidity before investing |
| Currency risk | Why it happens: When you invest in foreign stocks, currency movements can impact your returns - even if the share price rises in its local currency, you might lose money if that currency weakens against the dollar |
Ways we help: Access to stocks across multiple currencies and regions, allowing you to spread currency exposure if this aligns with your investment approach |
Protect yourself with these risk management strategies
All investing involves risk and share prices can fall as well as rise. Here's how to manage these risks effectively.
Portfolio diversification
Spread your investments across different companies, sectors and regions to reduce concentration risk. Our stock trading platform gives you access to stocks and ETFs across US, UK, German, and Irish markets without paying commission, FX charges or custody fees, enabling you to diversify your portfolio.
Position sizing
Don't invest more than you can afford to lose in any single stock or sector. By limiting how much capital you allocate to individual positions, you could help protect your overall portfolio from significant losses if one investment performs poorly.
Stop losses
Set predetermined exit points to limit potential losses on individual positions. Stop-loss orders automatically trigger a sale when a stock reaches your specified price, helping you manage risk without constantly monitoring the market.
Regular monitoring
You can regularly review your holdings to track performance and ensure your portfolio remains aligned with your personal goals and risk tolerance.
Education
Continue learning about investing through resources like our learning hub and IG Academy to improve your decision-making skills.
Find opportunities to trade volatility
Stay informed about potential volatility with our free alerts, saving you time by monitoring the markets on your behalf.
You can set up automated messages by email or push notification to let you know whenever conditions or events that you specify occur. We can alert you to:
Price changes
Get notified whenever a market moves by the percentage or number of points you specify.
Price levels
Find out whenever a market hits a price of your choice.
Technical conditions
Know when your chosen technical conditions have been met by a market. Create alerts using a wide range of popular indicators like Moving Average, MACD and Bollinger Bands.
Economic events
Set up economic calendar alerts to get advance notice on upcoming events and announcements. Plus, you’ll receive macroeconomic figures as soon as they’re released.
We help you to plan and manage your investing decisions
Before you start investing, it's important to understand financial markets and different investment approaches. Our educational materials are here to help you grow as an investor and manage your risks effectively.
FAQs
How do you manage risk when investing?
Risk management involves several approaches including diversifying across different companies and markets, setting clear entry and exit points and regularly monitoring your portfolio. Education also plays an important role - understanding markets and investment approaches could help you make informed decisions.
How often should you review your investment portfolio?
Portfolio review frequency depends on your personal circumstances and goals. Long-term investors might review quarterly or semi-annually, while others prefer monthly check-ins. Regular monitoring helps ensure your investments remain aligned with your risk tolerance and objectives.
What is diversification in investing?
Diversification means spreading your investments across different companies, sectors and geographic regions to reduce risk. Instead of putting all your capital into one or two stocks, you hold a range of investments so that poor performance in one area doesn't significantly impact your entire portfolio.
What's the difference between investing and trading?
Investing typically involves buying stocks with the intention of holding them for the long term, focusing on company fundamentals and growth potential. Trading usually involves more frequent buying and selling to profit from short-term price movements, often using leveraged products like CFDs.
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Disclaimers
- CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. Professional Clients can lose more than they deposit.
- The value of shares and ETFs bought through an IG stock trading account can fall as well as rise, which could mean getting back less than you originally put in. Please ensure you fully understand the risks and take care to manage your exposure.
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