What is equity risk?

Investing cash in a company's stock is usually more risky than investing in so-called 'risk free' investments, such as government bonds. This is called equity risk.

Where have you heard about equity risk?

You may have heard about equity risk in relation to equity risk premium – the larger return investors expect to receive for taking their money out of 'risk free' investments and taking on equity risk by investing in the stock market instead.

What you need to know about equity risk.

The risks of investing in equity include share price falls, receiving no dividends or receiving dividends lower in value than expected. They also include the risk that a company restructure may make it less profitable.

Alternatively a company may fail. If this happens, you may be at the end of a long list of creditors and therefore risk not get the value of your investment back.