The risks vary significantly per investment category. You can invest in mutual funds, stocks, and bonds. You can also invest in options and leveraged products. These instruments may offer higher returns but also carry a higher risk of loss. You can limit risks by first understanding the different categories before investing in them. Also ask yourself whether an investment aligns with your goals, expectations, and capabilities.
"}},{"componentType":"accordion","accordionList":[{"title":"Mutual Funds","richBody":{"value":"Risks of investing in mutual funds
For each investment fund, a ‘Key Information Document’ is available in Mijn ING. This document includes, among other things, the risk profile of the fund. Additionally, it is important that you thoroughly understand the general risks of investing in investment funds before you start investing in them. Therefore, carefully read through the risks listed below.
Price risk
With investment funds, you are exposed to the risk of price fluctuations. The value of a mutual fund may decline if the value of the investments within the fund decreases.
Credit risk
This is the risk that the company in which your money is invested goes bankrupt. With an investment fund, you invest in multiple companies, which lowers the risk compared to buying stocks of a single company or a bond from a single issuer. However, even with investment funds, there is no guarantee that you will get your money back. If one of the companies in the investment fund goes bankrupt, the fund may become worth very little or even nothing. In that case, you lose (part of) your investment.
Liquidity risk
If an investment fund invests in stocks that are not frequently traded, the fund may not be able to sell enough of its holdings to meet its financial obligations to investors.
Currency risk
This risk exists when you invest in stocks that are not denominated in euros. If the exchange rate of the foreign currency in which the stock is listed falls, the value of your stocks will decrease.
Even when you invest in stocks that are listed in euros, you may still face currency risk. These companies may have operations in, or conduct significant business with, countries that use a currency other than the euro.
Interest rate risk
In general, an interest rate increase has a negative impact on the price development of investment funds. Some investment funds are more sensitive to interest rate changes than others.
Geographic/sector risk
Do you have an investment fund that is primarily active in a specific region or sector? Then its value is sensitive to developments in that region or sector.
Sustainability risk
A sustainability risk is the risk that the value of the investment fund decreases as a result of events or circumstances in the ecological or social domain, or due to poor governance by a company or country. When such events or circumstances occur, they can negatively impact the financial position of companies or countries, and thereby the investment fund.
The risks of investing in complex investment funds
Investing in complex investment funds involves additional risks compared to non-complex investment funds. Read more about Complex Investment Funds (Dutch).
Useful links
"},"textLinks":[{"url":"/en/personal/investing/investments-at-ing/risks-of-investing-per-investment-type","text":"Also read our information about the general risks of investing."}]},{"title":"Stocks","richBody":{"value":"Risks of investing in stocks
It is important that you fully understand the risks of stocks before investing in them. Therefore, carefully read the risks listed below.
Price risk
With stocks, the risk of price fluctuations is high. The price risk is mainly determined by the quality of the company, the development of the sector to which the company belongs, and the performance of the stock markets. Speculative stocks, such as very young technology companies, are riskier than stocks of companies with stable operations, such as utility companies.
Credit risk
If the company whose stocks you have purchased goes bankrupt, there is no guarantee that you will get your money back. In that case, the stocks may be worth little or nothing. You then lose (part of) your investment.
Liquidity risk
There is a risk that stocks cannot or can hardly be traded on the stock exchange. For example, if a company is performing poorly and no one wants to buy its stocks. If there are many sellers and few buyers, the price may fall. As a result, the investor may not be able to sell their stocks, or not at a reasonable price. The higher the market capitalization of the company (outstanding shares multiplied by the stock price), the lower the liquidity risk.
Currency risk
This risk exists when you invest in stocks that are not denominated in euros. If the exchange rate of the foreign currency in which the stock is listed falls, the value of your stocks will decrease.
Even when you invest in stocks listed in euros, you may still face currency risk. Companies may have operations in, or conduct significant business with, countries that use a currency other than the euro.
Interest rate risk
In general, an increase in interest rates has a negative impact on the price development of stocks. Some stocks are more sensitive to interest rate changes than others.
Fiscal risk
Foreign tax authorities sometimes withhold (part of) the dividend. This portion cannot be reclaimed, resulting in you receiving less dividend.
Sustainability risk
A sustainability risk is the risk that the value of your investments decreases as a result of events or circumstances in the ecological or social domain, or due to poor governance by a company.
When such events or circumstances occur, they can negatively impact the financial position of these companies.
Useful links
"},"textLinks":[{"url":"/en/personal/investing/investments-at-ing/risks-of-investing-per-investment-type","text":"Also read our information about the general risks of investing."}]},{"title":"Bonds","richBody":{"value":"Risks of investing in bonds
It is important that you fully understand the risks of bonds before investing in them. Therefore, carefully read the risks listed below.
Price risk
The value of your bond may fall below its nominal value during its term. This is influenced by supply and demand and the level of interest rates.
Credit risk
If the financial position of the issuer is poor, interest payments and repayment may not be made. This is especially important to consider with bank-issued bonds. If a bank is in poor financial health, the regulator may decide to improve the bank’s financial position. This may come at the expense of bondholders, who could lose all or part of their investment.
Bond loans usually have a rating (see below under “Rating”). The higher the rating of the issuer, the lower the risk that interest and repayment will not be made.
Liquidity risk
This is the risk that bonds cannot or can hardly be traded on the stock exchange. For example, if a company is performing poorly, the investor may not be able to sell their bonds. If there are many sellers and few buyers, the price may fall. This risk also depends on the total loan size: the larger the outstanding amount, the lower the risk, and vice versa.
Currency risk
You face this risk when you invest in bonds that are not denominated in euros. If the exchange rate of the foreign currency falls, the value of your bonds may decrease.
Interest rate risk
If capital market interest rates rise, bond prices on the stock exchange generally fall, and vice versa.
Reinvestment risk
With some bonds, the issuer has the option of early redemption. This means, for example, that a 6% bond may be repaid while the market interest rate is only 3% at that time. This reduces your return. If you reinvest the proceeds in a new bond, it may only yield 3%. This risk also applies at the bond’s maturity.
Bond ratings
Most bond loans have a rating. This rating is an indication of the creditworthiness of the bond issuer. Credit rating agencies Moody’s and Standard & Poor’s (S&P) are the most well-known and widely used worldwide. Pay attention to the rating when purchasing a bond.
| Moody's | S&P | Fitch | Long-Term Quality |
|---|---|---|---|
| Long-Term | |||
| AAA | AAA | AAA | Exceptional quality (prime) |
| Aa1 | AA+ | AA+ | |
| Aa2 | AA | AA | |
| Aa3 | AA- | AA- | Excellent quality (high grade) |
| A1 | A+ | A+ | Good quality (upper medium grade) |
| A2 | A | A | |
| A3 | A- | A- | |
| Baa1 | BBB+ | BBB+ | Acceptable quality (lower medium grade) |
| Baa2 | BBB+ | BBB+ | |
| Baa3 | BBB- | BBB- | |
| Ba1 | BB+ | BB+ | Speculative (non-investment grade) |
| Ba2 | BB | BB | |
| Ba3 | BB | BB- | |
| B1 | B+ | B+ | Weak (highly speculative) |
| B2 | B | B | |
| B3 | B- | B- | |
| Caa | CCC+ | CCC | Very weak (substantial risks) |
| Caa | CCC | CCC | Very weak (extremely speculative) |
| Caa | CCC- | CCC | Interest payments have stopped (in default with little prospect for recovery) |
| / | D | DDD | All payments have stopped (in default) |
| / | D | DD | |
| / | D | D |
Useful links
"},"textLinks":[{"url":"/en/personal/investing/investments-at-ing/risks-of-investing-per-investment-type","text":"Also read our information about the general risks of investing."}]},{"title":"ETF's","richBody":{"value":"The risks of investing in ETFs / index trackers
Index trackers or ETFs (Exchange Traded Funds) are investment products that closely follow an index. They combine the benefits of stocks and bonds with those of an investment fund. Technically, an index tracker is an investment fund that includes all the stocks of an index in identical proportions. As a result, an index tracker closely mirrors the performance of an index or a part of it. It is important that you fully understand the risks of index trackers before investing in them. Therefore, carefully read the risks listed below.
Price risk
The price of the index tracker falls if the value of the investments within the index tracker declines. For example, if you have an index tracker that follows the AEX, its price will closely follow the performance of the AEX.
Deviation from the Index
There is no guarantee that the price of the index tracker will exactly follow the index.
The price may deviate, for example, due to a lack of liquidity. You can find the deviations from the index for all index trackers in the price information of the index tracker in Mijn ING.
Counterparty risk
There are two ways in which index trackers follow an index: physical replication and synthetic replication.
Physical replication
In this case, the issuer of the index tracker purchases the underlying securities of the index.
Some issuers include terms that allow them to lend these securities (Security Lending), purchase derivatives, or enter into swap agreements. These transactions always involve a counterparty. Counterparty risk here is the risk that this party cannot fulfil its obligations to the issuer of the index tracker.
Synthetic replication
In this case, the fund does not hold the actual securities but has an agreement with a financial institution. Counterparty risk also applies here.
Liquidity risk
The liquidity of an index tracker can significantly affect costs and, therefore, returns.
Low liquidity can lead to difficulties when entering or exiting the investment and result in a less favourable transaction price (a higher bid/ask spread).
Currency risk
Index trackers may follow funds that are denominated in foreign currencies or may themselves be denominated in foreign currencies. Due to exchange rate fluctuations, you may be exposed to risk. Currency effects can have both a positive and a negative impact on the value of your index tracker.
Fiscal risk
Foreign tax authorities sometimes withhold (part of) the dividend. This portion cannot be reclaimed, resulting in you receiving less dividend.
Geographic and sector risk
Are you investing in a specific region or sector with an index tracker? Then its value is sensitive to developments in that region or sector.
Sustainability risk
A sustainability risk is the risk that the value of an ETF or tracker decreases as a result of events or circumstances in the ecological or social domain, or due to poor governance by a company or country. When such events or circumstances occur, they can negatively impact the financial position of companies or countries, and thereby the ETF or tracker.
Useful links
"},"textLinks":[{"url":"/en/personal/investing/investments-at-ing/risks-of-investing-per-investment-type","text":"Also read our information about the general risks of investing."}]},{"title":"Options","richBody":{"value":"The risks of investing in options
The main risk with options arises from the leverage effect of this product. As a result, the price of the option fluctuates more strongly than the price of the underlying asset. You also face risk because time value and expectation value are factors in option pricing—unlike, for example, directly investing in stocks.
Trading in options can be risky
It is important that you fully understand the risks of options before investing in them. Therefore, carefully read the risks listed below.
Risk when buying/writing options
If you buy options, you can lose your entire investment. If you sell options (write options), your loss can exceed the option premium you received. When writing call options, the potential loss can, in principle, be unlimited.
Risk when writing call options
When you write a call option, you expect the price of the underlying asset to remain roughly the same or to fall. If the price rises, you may be assigned to deliver the underlying asset at the option’s strike price. If you do not own the asset, you must buy it at a higher market price. Your loss is the difference between the higher market price and the lower strike price, minus the premium you received.
Risk when writing put options
You expect the price of the underlying asset to remain roughly the same or to rise.
If the price falls, you may be assigned to buy the underlying asset at the option’s strike price, which is higher than the market price. Your loss is the difference between the strike price and the received option premium.
Margin obligation
When trading options, a so-called margin obligation may arise if you do not own the underlying asset. This obligation also fluctuates in value, and you must have sufficient funds available to meet it. If the margin obligation increases and you cannot deposit additional funds, ING may close your option position at a time that is unfavourable for you.
How is margin calculated?
The margin obligation is calculated using the following factors:
For stock options, the margin is the highest result from the following formulas:
Put option: (premium + [% x (2 x strike price – spot price)]) x contract size
2. Premium x 1,25 x contract size
3. (Premium + € 0,50) x contract size
For index options, the surcharge in the third formula is € 3,00 instead of € 0,50.
The premium used in the calculation is the latest price from the previous trading day.
You can find the current margin factors here (Dutch).
Useful links
"},"textLinks":[{"url":"/en/personal/investing/investments-at-ing/risks-of-investing-per-investment-type","text":"Also read our information about the general risks of investing."}]},{"title":"Leveraged Products","richBody":{"value":"The risks of investing in leveraged products
With a leveraged product, you can benefit more quickly from a rise or fall in the price of a stock, index, commodity, bond, or currency. Due to the leverage effect, investing in a leveraged product can be riskier than directly investing in, for example, stocks. This is because leverage works against you if the price rises while you expected it to fall. Trading in leveraged products therefore requires a lot of knowledge and is mainly done by experienced and active investors.
It is important that you fully understand the risks and characteristics of the different types of leveraged products before investing in them. Therefore, carefully read the risks listed below.
Turbo products are complex instruments and, due to the leverage effect, carry a high risk of rapidly increasing losses. 70% of retail investors lose money when trading turbo products with this provider. It is important that you fully understand how turbo products work and assess whether you can afford the high risk of loss.
Leverage risk
Investing in leveraged products means investing with a certain leverage. Due to the leverage, the price of the product fluctuates more strongly than the price of the underlying asset.
Stop-Loss risk
If the price of the underlying asset reaches the stop-loss level, the leveraged product is terminated. In the worst-case scenario, you can lose your entire investment.
Currency risk
The prices of leveraged products that have an underlying asset in a currency other than the euro can fluctuate due to changes in the exchange rate.
Credit risk
This is the risk that the issuing institution fails to meet its payment obligations.
Useful links
"},"textLinks":[{"url":"/en/personal/investing/investments-at-ing/risks-of-investing-per-investment-type","text":"Also read our information about the general risks of investing."}]},{"title":"Structured Products","richBody":{"value":"The risks of investing in structured products
Trading in structured products requires knowledge and experience. It is important that you fully understand the risks of structured products before investing in them. Therefore, carefully read the risks listed below.
Credit risk
A structured product is issued by an issuing institution (for example, ING Bank N.V.).
In the event of the issuer’s bankruptcy, there is a possibility that you will lose your entire investment.
Interest rate risk
Some structured products are more sensitive to interest rate changes than others.
In general, an interest rate increase has a negative impact on the price development of structured products that invest in stocks.
Currency risk
Some structured products are denominated in foreign currencies. Due to exchange rate fluctuations, you may be exposed to risk. Currency effects can have a positive, but also a negative, impact on the value of your structured product.
Useful links
"},"textLinks":[{"url":"/en/personal/investing/investments-at-ing/risks-of-investing-per-investment-type","text":"Also read our information about the general risks of investing."}]},{"title":"BRRD","richBody":{"value":"After the financial crisis in 2008, new global regulations were developed to reduce the likelihood of future financial crises and to limit their harmful effects. Within the EU, the Bank Recovery and Resolution Directive (BRRD) was developed and implemented as part of this effort. This is a European directive that has been incorporated into the national laws of EU member states.
The purpose of the BRRD is to enable the orderly recovery and resolution of banks that are in financial distress and cannot be resolved through normal insolvency procedures. The guiding principle is that this should occur without public financial support, minimizing the cost to taxpayers. The BRRD grants supervisors additional powers. One important tool that a supervisor can apply in the context of bank recovery and resolution is the bail-in. A bail-in means that when a bank’s financial health deteriorates, a contribution may be required from the bank’s capital providers and other creditors to improve its financial position. This contribution—through the write-down of claims on the bank or their conversion into subordinated claims or shares—can, in principle, be demanded from all non-exempt creditors. Only a limited number of claim types are legally exempt from the bail-in tool, such as deposits covered by the deposit guarantee scheme.
Bail-in
The BRRD and the possibility of a bail-in have introduced a new situation. Previously, a bank creditor—such as an investor in unsecured bank bonds—only risked losing (part of) their investment in the event of the bank’s insolvency. With a bail-in, this loss can now occur at an earlier stage. A bail-in is a far-reaching measure, and the supervisor must respect the principle that no creditor should incur greater losses than they would have in a normal insolvency procedure. This principle is known as “no creditor worse off.” It is not possible to give a general answer as to when a bail-in measure will affect a bank’s creditors. This depends on factors such as the bank’s financial position, the size and composition of its financial buffers, the nature of the supervisory measure taken, and the type of financial instrument issued by the bank in which one has invested. The original insolvency ranking remains in effect even in the case of a bail-in.
Shares, Subordinated Bonds, and Hybrid Instruments (such as Contingent Convertible Bonds and Perpetual Bonds)
From the above, it follows that providers of equity or subordinated capital will bear the first losses. A bank can raise such capital by issuing shares, subordinated bonds, and hybrid instruments. The risk of bail-in is therefore highest for these financial instruments. Other possible measures include the transfer of bank assets to another entity, which may limit the bank’s ability to meet its obligations. Additionally, the maturity of claims and the amount of interest/coupon payments may be adjusted. Coupon payments and termination rights may also be suspended.
Consequences
Due to changes in financial markets, the tradability of instruments issued by banks may deteriorate, and it may become impossible to sell these instruments—or only at a price significantly lower than the original investment. Similar powers, including the possibility of a bail-in, may also be granted to supervisors in countries outside the EU. Moreover, there may be differences between EU countries in how the BRRD has been implemented into national law. Exposure to the consequences of a bail-in can also occur indirectly, for example, when investing in financial instruments issued by banks through investment funds (while observing the principle of risk diversification) or derivatives.
Useful links
"},"textLinks":[{"url":"/en/personal/investing/investments-at-ing/risks-of-investing-per-investment-type","text":"Also read our information about the general risks of investing."}]},{"title":"Private Markets","richBody":{"value":"The Risks of Investing in Private Markets
At ING, you can invest in Private Markets through complex investment funds.
The instruments that provide access to Private Markets are characterized by being illiquid or only partially liquid, and in most cases, they carry risks comparable to a portfolio consisting entirely of stocks. Illiquidity means that the investments cannot, or can only with difficulty or to a limited extent, be traded during the investment period. This means that if you want to sell your investment, it may not be possible.
All risks that apply to non-complex investment funds also apply to Private Markets products. In addition, investing in complex investment funds involves additional risks.
Read more about Complex Investment Funds (Dutch)
"},"textLinks":[{"url":"https://assets.ing.com/m/31428ef2c3a75e32/original/Complexe-beleggingsfondsen-september-2023.pdf","text":"Lees meer over Complexe beleggingsfondsen"}]},{"title":"Guarantee Products","richBody":{"value":"The Risks of Investing in Guarantee Products
For most guarantee products, the guaranteed value is only returned at the end of the term.
With products offering 100% guarantee, you receive at least the guaranteed value at the end of the term. Products with limited risk also have a guaranteed final value, but this value is lower than the issue price.
Credit risk
A guarantee product is issued by an issuing institution (for example, ING Bank N.V.).
In the event of the issuer’s bankruptcy, there is a possibility that you will lose your entire investment.
Interest rate risk
Some guarantee products are more sensitive to interest rate changes than others.
In general, an interest rate increase has a negative impact on the price development of guarantee products that invest in stocks.
Currency risk
Some guarantee products are denominated in foreign currencies. Due to exchange rate fluctuations, you may be exposed to risk. Currency effects can have a positive, but also a negative, impact on the value of your guarantee product.
Useful links
"},"textLinks":[{"url":"/en/personal/investing/investments-at-ing/risks-of-investing-per-investment-type","text":"Also read our information about the general risks of investing."}]}]},{"componentType":"linkList","iconTitle":{"title":"Meer weten over beleggen"},"textLinks":[{"url":"/particulier/beleggen/beleggen-bij-ing","text":"Beleggen bij ING"},{"url":"/particulier/beleggen/duurzaam-beleggen","text":"Duurzaam beleggen"},{"url":"/particulier/beleggen/hoe-werkt-beleggen","text":"Hoe werkt beleggen"},{"url":"/particulier/beleggen/ing-investment-office","text":"ING Investment Office"},{"url":"/particulier/beleggen/beursnieuws-en-actualiteit","text":"Beursnieuws en actualiteit"}]}]}}}