Risks of capital market investments

If you invest in the capital markets, you have the chance of higher returns than with safe interest-bearing investments. That chance does not come without risk. If you understand this beforehand, you make better decisions – and are more likely to stay calm in difficult phases.

The most important risks

• Price swings: Stock markets can fall sharply within a short time. Falls of several dozen per cent have also happened in the past.
• Risk of loss: Without a guarantee, you may end up with less capital than you paid in.
• Timing risk: A market slump shortly before the payout begins weighs more heavily than one when you are young.
• Inflation risk: Even safe investments can lose value in real terms if prices rise faster than the return.
• Behavioural risk: If you sell in a crisis, you turn paper losses into real losses.

What can limit risks

• Broad diversification across many companies, countries and sectors.
• A long investment period, which leaves time to make up for setbacks.
• Regular saving, because you then buy at different prices.
• Gradually shifting into lower-risk investments before retirement.

For the standard account (Standarddepot), this shift is laid down by law: five years before the payout, no more than half is in the higher-opportunity fund, and two years before, no more than 30%.

Why our calculator shows no fluctuations

The calculator works with a constant yearly return. That makes the effect of time, contribution and costs visible, but it does not show how bumpy the path really is. The three scenarios therefore only show how strongly the result depends on the assumption – not what will happen.