Understanding and Managing Investment Risk | American Funds

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Investing Fundamentals

Understanding and Managing Investment Risk

Investment risk management is an important part of investing. 

Types of Risk

Risk is an inherent part of investing. Whatever investments you choose, there’s always some kind of risk involved, and you need to be comfortable with your investment risk assessment.

Determining Your Risk Tolerance

Here are three considerations you should review when planning your investments.

Balancing Risk and Reward

What kind of investor are you? Are you less concerned by the peaks and valleys of investing? Or do you prefer as steady an investing experience as possible?

The reward for holding on to your investments through both up and down markets is that your investments may grow in value. But you have to be willing to hold on through the long term in hopes of reaching your goals. If you go the slower route with less volatile investments, your investments will probably fluctuate less, but may not reward you as much in the long run.


Talk to your financial professional before making any changes to your investment plan or if you want more information about risk.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.