The risks of investing, and the verdict on each

Only one of the risks of investing pays you for taking it. Most of the rest you can remove, and two of them you carry whether you invest or not. Here is the verdict on each, judged on the two questions.

Market risk is the only risk that pays you

Market risk is the risk that the whole market falls, and it is the one risk investors get paid to carry. Take it away and the return goes with it. Some banks split it into market risk and price risk. They are the same thing: the value of what you own can drop, and no amount of diversification stops that.

Since 1994, the MSCI All Country World IMI index has returned an average of 8.2% a year. That index holds more than 8,000 companies across over 40 countries, so it is about as spread out as investing gets. The 8.2% did not arrive in a straight line. During the dotcom crash in 2000, 2001 and 2002, it fell hard. Anyone who sold made the loss permanent. Anyone who stayed saw it recover.

Time is what turns market risk into a return. The MSCI World index, covering around 1,500 companies in developed markets, has data going back to 1970. Buy at a random moment and sell exactly one year later, and you finished with a loss in roughly 26% of cases. Over five years, that drops to roughly 17%. Over twenty years, there is no start date in the index's history that ended in a loss. Take the worst possible moment to begin, the absolute peak of the dotcom bubble in March 2000. A crash of more than 40% followed within weeks, and a financial crisis seven years after that. Twenty years on, that investor was back in the plus. Those figures are for someone who invested everything in one go, and spreading your purchases over time improves them.

That is why there is no return without risk. Market risk is paid, and it is not removable. How much of it you hold is a decision about your horizon.

Company specific risk is the risk you are not paid for

Company specific risk is the risk that one company fails, and nobody pays you a premium for carrying it. Fraud, bad management, a failed product, a technology that gets overtaken: the causes vary and the outcome does not.

Lernout & Hauspie collapsed in 2001 after accounting fraud. General Motors went bankrupt in 2009, and Kodak followed in 2012, undone by digital photography. All three once looked untouchable, and in each case the shareholders lost everything. If that share was all you owned, it was a disaster. If you owned a global index fund, you barely noticed.

The market does not reward you for taking this risk, because you could have avoided it for free. This is the argument for buying the whole market rather than picking inside it, and it is why we built Curvo as an alternative to picking stocks. Company specific risk is unpaid, and you can remove all of it.

Concentration risk is company specific risk at portfolio level

Concentration risk is the same unpaid risk seen from further away. It hides in four places: one share, one sector, one country and one fund manager. Putting everything into a single share is the obvious one, and the other three are easier to walk past.

Country concentration catches Belgians most often. A tracker on the BEL 20 feels familiar to a Belgian, because you recognise AB InBev, KBC, UCB and Lotus Bakeries. But the BEL 20 is less than 0.3% of the world stock market. You would be skipping more than 99% of it, along with entire sectors where Belgium barely appears, like software, e-commerce and entertainment.

Sector concentration is sneakier, because it feels like expertise. Working in pharma does not give you an edge in pharma shares, since everything publicly known is already in the price. It does double your exposure: if the sector struggles, your portfolio and your job struggle together. Fortis employees who held a large chunk of their wealth in Fortis shares learned this in 2008.

Manager concentration is the quietest of the four. Choosing one fund manager to beat the market puts your outcome in the hands of one person's decisions, and no premium is attached to accepting that. That is the case for passive investing over active. Concentration risk is unpaid, and holding the world instead of a slice of it removes it.

Behavioural risk is the one risk you bring yourself

Behavioural risk is the risk that you sell in a crash, stop your contributions, or never start at all. Diversification cannot touch it, because it sits in you rather than in your portfolio.

Morningstar measures it every year. Mind the Gap 2025, published on 13 August 2025, found that the average dollar invested in US mutual funds and ETFs earned 7.0% a year over the ten years to 31 December 2024. That is 1.2 percentage points a year less than the funds those dollars were sitting in. The gap comes entirely from the timing and size of investors' own purchases and sales.

The more interesting finding is what makes the gap wider. It grew the more investors traded, and it grew the further a fund strayed from its index. So Morningstar's own data points straight at trading less and holding a broad index fund.

Resolving to behave better is not a plan, because the resolution is made on a calm day and tested on a terrible one. Removing the decisions works. Set up an automatic monthly investment so the choice is made once, in advance. Check your portfolio monthly or quarterly instead of daily, because daily you are watching noise. Deleting the investing app from your phone counts as risk management.

Behavioural risk is unpaid. You can remove it, but only by taking the decisions out of your own hands.

Liquidity risk depends on what you hold, not on investing itself

Liquidity risk is the risk that you cannot sell at a fair price when you want to, and it belongs to the thing you own rather than to investing in general. Most lists name the risk without saying what actually carries it.

It is real in single small company shares, in unlisted property, in structured products with a fixed term, and in thinly traded niche ETFs. What these have in common is that there may be no buyer on the day you want out, so the price you accept is the price someone is willing to give.

A fund of large listed companies sits at the other end. Shares in those companies change hands on an exchange every trading day, in volume, at a public price. Liquidity risk is unpaid, and you remove it by choosing listed, widely traded holdings over niche or unlisted ones.

Counterparty risk is answered by who holds your funds

Counterparty risk comes down to one question: whether your funds are your provider's to lose. Whether the provider itself can get into trouble is a separate question, and it is the less important of the two.

When a separate custodian holds the funds, they sit outside the provider's balance sheet. They are not the provider's property and they cannot be used to pay the provider's creditors. At Curvo, that custodian is Stichting Noordnederlandse Beleggersgiro, and you can read exactly how the custodian works and how your money is kept safe.

There is a version of this risk inside the fund too. A synthetic ETF tracks its index through a swap contract with a bank, so it carries counterparty risk to that bank. A physical ETF actually owns the shares, so it does not. Counterparty risk is unpaid, and it is removed by how the account and the fund are built rather than by anything you do each month.

Currency risk is real, and hedging it is not free

Currency risk is the risk that the euro value of your portfolio moves for reasons that have nothing to do with the companies inside it. A global fund holds American, Japanese and British companies, and those shares are priced in dollars, yen and pounds.

Buying the fund in euro on Euronext Amsterdam does not change this. When the euro rises against the dollar, the same American holdings are worth fewer euros. When the euro falls, they are worth more. The companies did nothing either way.

Some funds hedge this away. You recognise them by "EUR Hedged" or "Currency Hedged" in the name. The protection is not free: you pay higher fees, plus the interest rate difference between the two currencies, and those hedging costs do not appear in the fund's ongoing charges figure. Currency risk is unpaid, and it is removable in principle, but the removal has a price tag.

Interest rate risk applies to your bonds, not your shares

Interest rate risk is the risk that the bonds you already own fall in price when market rates rise. A newly issued bond pays the new, higher rate, so nobody wants yours at full price. Long-dated bonds react far more strongly than short-dated ones.

Bonds usually calm a portfolio down, and often they rise when shares fall. In 2008, quality bonds gained while stock markets dropped worldwide. But 2022 showed the limit: rates rose so fast that shares and bonds fell together.

Interest rate risk is paid, thinly, through the yield you earn. You can remove it by holding no bonds at all. That trades one risk for another, because bonds are in the portfolio precisely to reduce how far it falls.

Credit risk is the risk the borrower does not pay you back

Credit risk is the risk that the government or company you lent to cannot repay you. A bond is a loan, and a loan depends on the borrower.

Bondholders are better placed than shareholders when a company is wound up, because a bondholder is a creditor and gets paid first. Rating agencies grade the risk: AAA down to BBB counts as investment grade, and anything below BBB is high yield, also known as junk. High yield pays more interest for the obvious reason.

Credit risk is genuinely paid, through the extra yield a riskier borrower has to offer. It is largely removable by lending to thousands of issuers at once instead of one, which is what a broad bond fund does.

Inflation risk is the one you take by doing nothing

Inflation risk is the one risk you take by leaving your money in a savings account instead of investing it. Your balance does not move, so nothing looks like it is happening. What is happening is that the same amount buys less every year.

Belgian numbers make it concrete. Between 2003 and 2025, Belgian inflation averaged 2.45% a year, measured by Eurostat's harmonised index of consumer prices. Over the same years, the average rate on a regulated Belgian savings account was 0.83%, from the National Bank of Belgium's survey of bank interest rates published by the European Central Bank. Inflation was the higher of the two in 84% of those months.

October 2022 was the extreme. Belgian inflation passed 13% while the savings rate crawled along behind it. The money in those accounts was perfectly safe. Its purchasing power was not, and that is what inflation does to savings quietly, year after year.

Inflation risk is unpaid, and you carry it whether you invest or not. You cannot remove it. You can outrun it, which is the whole reason market risk is worth taking.

The risk left off every list is the risk of not investing

The biggest risk of a savings account is not that the money disappears. It is that it grows too slowly to reach the goal you were saving for.

That is a different problem from inflation. Inflation is purchasing power lost. This is a goal missed: retiring later than you wanted, or helping your children less than you hoped, or having fewer options at the moment you need them most.

Not investing feels safe because the number on the statement never falls. But a decision to keep everything in cash is still a decision about risk, and it is one you make silently. Comparing saving with investing over a few decades is the fastest way to see what that decision costs.

Which risks of investing are worth taking

One risk pays you, and it is market risk. Most of the others come off entirely once you stop picking shares, sectors, countries and managers, and once you stop making decisions in the middle of a crash. What remains is either a property of what you chose to hold, like currency and liquidity risk, or the price of the stability you asked for, like interest rate risk on your bonds.

The list the banks publish is not wrong. It is unranked, and an unranked list of risks is exactly what keeps people in a savings account for thirty years. Treating all ten risks as equally frightening leads to the one risk nobody puts on the list, which is watching your purchasing power fade while you wait to feel ready.

The useful question is how much market risk fits the time you have. A twenty-five year old saving for retirement and a fifty-five year old buying a house in three years should not hold the same portfolio, and neither of them needs to work that out alone. With Curvo, a few questions at sign-up match you with a portfolio built for your horizon, and your monthly investment happens automatically after that.