Market risk refers to volatility, or the extent to which
the market value of your investment will fluctuate, moving
down as well as up.
Different types of investments experience different levels
of volatility. Investments that are expected to produce
higher long-term returns generally experience greater volatility
in the short term.
Volatility becomes a problem if you don't have the timeframe
to ride out the rough patches (see 'Mismatch Risk')
It's important to remember that markets go through regular
ups and downs. While it's tempting to sell out of an investment
after its value has fallen, historically investors who stick
with their strategy generally go on to recover and prosper.
Reproduced with the kind permission of FPA and
Macquarie Investment Management Limited
Copyright © 2002-07 Forsyte Consulting Pty Ltd unless otherwise stated.
