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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 shares and ETFs.
Start trading today. For account opening enquiries call 1800 601 799 between 9am and 6pm (AEDT) weekdays, or email newaccounts.au@ig.com.
How can I manage my risk when investing?
Become better at managing investment risk with free educational materials, like IG Academy
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 shares and ETFs across global markets to help you diversify if you choose to |
| Liquidity risk | Some shares trade infrequently, making it difficult to buy or sell quickly without affecting the price | Access to major global markets with high trading volumes, plus research tools to help you understand liquidity before investing |
| Currency risk | When you invest in foreign shares, 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 Australian dollar | Access to shares 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 share trading platform gives you access to over 11,000 domestic and international shares and ETFs, enabling you to diversify your portfolio if you choose to.
Position sizing
on't invest more than you can afford to lose in any single share 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 share 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.
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 shares, 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 shares 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 contracts for difference (CFDs).
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Footnotes:
1 $0 commission applies to clients who trade on the IG share trading account and opt for the default setting of ‘instant currency conversion’. Clients who choose to convert currencies manually will pay commission of 2 cents per share with a minimum charge of $10 on US stocks and, for European markets, we charge £10 / €10 per trade or 0.1%, whichever is higher. Other fees and charges may apply, please see our share trading cost and charges page.
2 Best Finance App, Best Multi-Platform Provider, Best Platform for the Active Trader and Best Online Stockbroker as awarded at the ADVFN International Financial Awards 2025.
3 When investing with us, you’ll do so via our share trading platform using our custodial model. This means that we manage, hold and safeguard securities you choose to buy and sell on your behalf. Via our custodial model, you’ll be able to buy and have a stake in actual assets – for example, shares in an ASX 200-tracking ETF or ASX 200-constituent company. You’ll also be entitled to dividends if any are paid, and granted voting rights if applicable.
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Disclaimers
- CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You do not own or have any interest in the underlying asset. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. Please consider the Margin Trading Product Disclosure Statement (PDS), Risk Disclosure Notice and Target Market Determination before entering into any CFD transaction with us.
- The value of shares, ETFs and ETCs bought through an IG share trading account can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results.
- Please ensure you fully understand the risks and take care to manage your exposure.
- The information on this website is prepared without considering your objectives, financial situation or needs. Consequently, you should consider the information in light of your objectives, financial situation and needs.
- This website is operated by IG Australia Pty Ltd. IG Australia Pty Ltd is located on Level 32, Queen & Collins, 376-390 Collins Street, Melbourne, VIC 3000. ABN 93 096 585 410, Australian Financial Services Licence No. 515106. Derivatives Issuer Licence in New Zealand FSP No. 684191, NZBN 9429047618251.