Kevin Begon -

How to balance risks and returns on your investments

Six out of ten Belgians wonder how to balance expected returns with the risks they’re taking. This is what emerges from a Profacts survey commissioned by BNP Paribas Fortis. Almost one in three Belgians say they know little or nothing about this subject.

In general, the expected return is proportional to the risk taken to achieve it. Do you want a higher return? Then you have to take more risks. The return is the reward that investors receive for the risk they have agreed to take on.

Low risk, low return

Current accounts, regulated savings accounts, term deposit accounts and branch 21 insurance-based investment plans are particularly safe. If your bank or insurer goes bankrupt, the Belgian Guarantee Fund reimburses your assets up to €100,000 per bank and per person, so the risk is minimal. The downside is that the returns on these products are extremely low.

Equities or bonds? 

Equities and bonds offer potentially higher returns. Returns from equities are not guaranteed. The value of shares quoted on the stock exchange can go down and, if the company concerned goes bust, shareholders have almost no chance of recouping any of their investment. Bonds, on the other hand, offer a fixed return but, as with equities, you could also lose money if the issuer goes bankrupt. 

Equities or bonds?

Equities and bonds potentially offer a higher return. With equities, the return is not guaranteed. The value of listed shares can fall, and if the company goes bankrupt, the probability of shareholders getting anything back is almost zero. On the other hand, for bonds, the return is fixed, but you are also exposed, as with shares, to a risk of loss in the event of bankruptcy.

Work out your investor profile 

So every investment carries a risk, which can’t be avoided. This is why a bank will determine your investor profile before offering you risky investments. Your profile will determine the investment products suitable for your risk appetite, financial capacity and desired returns.

Saving or investing?

Is there really a clear difference between saving and investing? Follow our tips to keep the distinction in mind and separate good saving habits from good investing habits.

Ask Your Bank 

BNP Paribas Fortis wants to help you see things more clearly when it comes to managing your money. That's why we asked over 1,000 Belgians about any questions and concerns they had. With our Ask Your Bank series, we address those questions and concerns in a fully transparent way