Risk

Question 1

Risks of Cash

Answer 1

Creditworthiness of deposit taking institution

FSCS Compensation

Exchange Rate Movements - foreign currency & offshore accounts

Inflation

Interest rates - fluctuations & reinvestment risk

Question 2

Fixed Interest

Answer 2

Interest rates

Liquidity - traded infrequently

Inflation - erodes capital value - value falls as inflation increases

Currency - exchange rate movements for global bonds

Default

Market/Systematic risk

Question 3

Equities

Answer 3

Equity Risk premium

Interest rate risk - borrowing

Investor sentiment

Exchange rate/currency risk

Systematic/market risk

Capital risk - rank last on company liquidation

Economic/political factors

Expectations of future profits, dividends and growth

Expected mergers/takeovers

Non-systematic risk/individual risk

Question 4

Property

Answer 4

Liquidity - slow to sell especially commercial

Costs

Expensive outlay

Void Periods

No FSCS

Capital losses

Interest rate risk - borrowing

Gearing risk - can magnify gains/losses

Problem tenants

Question 5

Commodities

Answer 5

Volatility/frequent imbalance between supply and demand

Demand affected by global economic cycle

Market is dominated by big companies and traders

Generally no income

High transaction costs

Lack of research ability by individuals

Question 6

Private Equity

Answer 6

Often highly geared

Often less liquid

Riskier