Risk Disclosure.
Investing carries inherent risks. This page provides a clear, plain-English overview of the key risks every investor should understand before committing capital. It is designed to inform, not to alarm — understanding risk is the foundation of sound decision-making.
01 Introduction
All forms of investing involve some degree of risk. The potential for higher returns is accompanied by a higher level of uncertainty. This page explains the most common types of investment risk so that you can make informed decisions aligned with your financial circumstances, time horizon, and tolerance for uncertainty. No investment is ever completely risk-free, and understanding these risks is an essential part of being a confident long-term investor.
02 Capital at Risk
The value of investments can go down as well as up. You may get back less than you originally put in, and in some cases you could lose your entire investment. This is the most fundamental risk in investing — the possibility that your capital is not preserved. Unlike cash held in a savings account, investments are not guaranteed to hold their value, and their price can fluctuate significantly over short periods. You should never invest money you cannot afford to leave invested for several years.
03 Past Performance
Past performance is not indicative of future results. Historical returns, whether positive or negative, do not guarantee that the same outcomes will repeat. Market conditions, economic factors, regulations, and individual circumstances all change over time. Any charts, data or examples shown on this site are for illustrative and educational purposes only and should never be interpreted as a forecast or promise of future returns.
04 Liquidity Risk
Some investments may be difficult to sell quickly at a fair price. Liquidity risk arises when there are not enough buyers or sellers in the market for a particular asset, forcing you to sell at a discount or wait an extended period to exit your position. Assets such as real estate, private equity, and certain bonds or funds can carry significant liquidity risk. Before investing, consider how easily you would be able to access your money if you needed it unexpectedly.
05 Concentration Risk
Putting too much of your money into a single investment, sector, or geographic region increases the risk of significant loss. Concentration risk is the opposite of diversification — when your portfolio is not spread out, a single setback in one area can have an outsized impact on your overall wealth. Diversification across different asset classes, industries, and regions is one of the most effective ways to manage this risk, though it cannot eliminate it entirely.
06 Inflation Risk
Inflation erodes the purchasing power of money over time. If your investments do not deliver a return that exceeds the rate of inflation, your capital will be worth less in real terms — meaning you will be able to buy less with it in the future than you can today. This is a particular concern for conservative investments such as cash or low-yield bonds held over long periods. Long-term investing is partly about staying ahead of the quiet erosion caused by inflation.
07 Currency Risk
Investing in assets denominated in a foreign currency introduces exchange-rate risk. Fluctuations in currency values can affect the overall return on your investment, independent of the performance of the asset itself. For example, if you are a UK-based investor holding US stocks, a decline in the US dollar relative to the pound could reduce the value of your holdings when converted back to sterling. Currency risk can add an extra layer of volatility to internationally diversified portfolios.
08 Counterparty Risk
Counterparty risk is the risk that the institution holding your assets — such as a broker, custodian, or bank — could fail or become insolvent. While regulatory frameworks in many jurisdictions provide investor protection schemes that may compensate you up to a certain limit if an authorised firm goes under, these schemes do not protect against falls in market value. Always check that your provider is properly authorised and regulated, and understand the limits of the protection that applies in your jurisdiction.
09 Leverage Risk
Leverage — borrowing money to invest — amplifies both gains and losses. While it can increase potential returns, it also increases the risk of losing more than your original investment. If the value of your leveraged position falls, you may be required to deposit additional funds (a margin call) or face having your position closed at a loss. Leverage is a sophisticated strategy that is generally not suitable for novice investors and should be used with extreme caution, if at all.
10 Educational Context
Ellington Investments is an educational resource designed to explain investing concepts in plain English. The content on this site is for information and educational purposes only. It is not financial, investment, legal or tax advice, not a recommendation to buy or sell any security, and not an offer or solicitation of any kind. Every investor's circumstances are different, and you should consider seeking independent professional advice before making any investment decisions. By using this site, you acknowledge that you understand these limitations and accept that you are solely responsible for your own investment decisions.
Remember: Understanding risk does not eliminate it — but it does help you prepare for it. A well-informed investor is better equipped to make decisions they can stick with through market ups and downs.
This page is an educational resource about investment risk. It is for information only and is not financial, investment, legal or tax advice, not a recommendation, and not an offer or solicitation to buy or sell any investment. The value of investments can fall as well as rise and you may get back less than you invest; past performance is not indicative of future results. Investor protection schemes cover authorised firms failing, up to scheme limits, and do not protect against falls in market value; schemes, limits and rules differ by country. Always confirm a firm is properly regulated and consider independent professional advice before investing.
ELLINGTON TRADE LTD is a registered International Business Company (IBC) with the St. Vincent and the Grenadines Financial Services Authority (SVGFSA) under IBC number 12785. Registered as a Virtual Asset Service Provider (VASP) under the Virtual Assets Business Act 2022 — registration number VABA‑2026‑0042. Ellington Ltd is headquartered in Ottawa, Canada at 275 Slater St. #900, ON K1P 5H9. This website is an educational resource and does not offer investment services. Last updated: 3 June 2026.