Risk Disclosure Statement

1. General Information

This Risk Disclosure Statement is provided by Finanz2go, an independent financial advisory firm based in Berlin, Germany. The purpose of this document is to inform clients and prospective clients about the various risks associated with different investment products and strategies. Understanding these risks is crucial for making informed investment decisions.

Investing in financial markets involves exposure to various risks, including but not limited to market volatility, interest rate fluctuations, credit risk, and liquidity constraints. While investments can offer potential returns, they can also result in losses, including the loss of principal. Past performance is not indicative of future results.

Clients are encouraged to carefully consider their investment objectives, risk tolerance, and financial situation before engaging in any investment activity. It is also advisable to consult with qualified professionals, such as tax advisors or legal counsel, to understand the implications of specific investment choices.

2. Investment Products and Associated Risks

2.1. Equities (Stocks)

Description: Equities represent ownership shares in a company. Investors in equities may benefit from capital appreciation and dividends.

Risks:

Market Risk: Stock prices can be volatile and are influenced by various factors, including economic indicators, company performance, and geopolitical events.
Business Risk: The specific risks associated with a company’s operations, management decisions, and industry dynamics.
Liquidity Risk: Some stocks, especially those of smaller companies, may have limited trading volumes, making it difficult to buy or sell shares without affecting the price.
Dividend Risk: Companies may reduce or eliminate dividend payments, affecting income expectations.

Considerations: Diversification across sectors and regions can help mitigate some risks associated with equity investments.

2.2. Bonds (Fixed-Income Securities)

Description: Bonds are debt instruments issued by governments, municipalities, or corporations to raise capital. Investors receive periodic interest payments and the return of principal at maturity.

Risks:

Interest Rate Risk: Bond prices inversely correlate with interest rate movements. Rising rates can lead to declining bond prices.
Credit Risk: The issuer may default on interest or principal payments. Credit ratings can provide insight into the issuer’s creditworthiness.
Inflation Risk: Inflation can erode the purchasing power of fixed interest payments.
Liquidity Risk: Some bonds may not be easily tradable, especially in times of market stress.

Considerations: Assessing the credit quality of issuers and the duration of bonds can help manage risks.

2.3. Exchange-Traded Funds (ETFs)

Description: ETFs are investment funds that trade on stock exchanges, holding a diversified portfolio of assets such as stocks, bonds, or commodities.

Risks:

Market Risk: ETFs are subject to the same market fluctuations as their underlying assets.
Tracking Error: The ETF’s performance may not perfectly match the performance of its benchmark index.
Liquidity Risk: Some ETFs, particularly those tracking niche markets, may have low trading volumes.
Complexity: Leveraged or inverse ETFs carry additional risks and are generally not suitable for long-term investors.

Considerations: Understanding the ETF’s structure, underlying assets, and expense ratios is essential.

2.4. Mutual Funds

Description: Mutual funds pool money from multiple investors to invest in a diversified portfolio managed by professional fund managers.

Risks:

Market Risk: The value of mutual fund holdings can fluctuate based on market conditions.
Management Risk: The fund’s performance depends on the manager’s investment decisions.
Liquidity Risk: While mutual funds are generally liquid, redemption restrictions may apply in certain circumstances.
Fees and Expenses: Management fees and other expenses can impact overall returns.

Considerations: Reviewing the fund’s prospectus and understanding its investment strategy is important.

2.5. Real Estate Investments

Description: Investments in real estate can be made directly by purchasing properties or indirectly through Real Estate Investment Trusts (REITs).

Risks:

Market Risk: Property values can decline due to economic downturns or changes in local markets.
Liquidity Risk: Real estate is typically less liquid than other asset classes, making it harder to quickly sell properties.
Tenant Risk: Rental income depends on tenant occupancy and their ability to pay rent.
Regulatory Risk: Changes in zoning laws, property taxes, or environmental regulations can affect property values.

Considerations: Diversifying across property types and locations can help manage risks.

2.6. Commodities

Description: Commodities include physical goods like gold, oil, and agricultural products. Investments can be made directly or through commodity-focused funds.

Risks:

Price Volatility: Commodity prices can be highly volatile due to supply and demand dynamics, geopolitical events, and currency fluctuations.
Storage and Transportation: Physical commodities require storage and transportation, which can incur additional costs and risks.
Regulatory Risk: Commodity markets are subject to regulatory changes that can impact prices and trading practices.

Considerations: Commodities can serve as a hedge against inflation but may not provide income.

2.7. Derivatives

Description: Derivatives are financial instruments whose value is derived from underlying assets, such as options, futures, and swaps.

Risks:

Leverage Risk: Derivatives often involve leverage, amplifying both gains and losses.
Complexity: Derivatives can be complex and may not be suitable for all investors.
Counterparty Risk: The risk that the other party in a derivative contract may default.
Liquidity Risk: Some derivatives may be illiquid, making it difficult to exit positions.

Considerations: Derivatives should be used cautiously and typically by experienced investors.

2.8. Structured Products

Description: Structured products are pre-packaged investments that typically include derivatives and are designed to meet specific investment objectives.

Risks:

Complexity: Structured products can be complex and may have embedded risks not apparent to all investors.
Credit Risk: The performance depends on the issuer’s creditworthiness.
Liquidity Risk: These products may not be easily tradable before maturity.
Market Risk: Returns may be linked to the performance of underlying assets, which can be volatile.

Considerations: Understanding the terms and conditions is crucial before investing.

2.9. Private Equity and Venture Capital

Description: Investments in private companies, either through direct ownership or funds, aiming for long-term capital appreciation.

Risks:

Illiquidity: These investments are typically long-term and not easily sold.
High Risk: Startups and private companies may fail, leading to total loss of investment.
Valuation Risk: Valuing private companies can be challenging due to lack of market prices.
Limited Transparency: Less regulatory oversight can result in limited information availability.

Considerations: Suitable for investors with high risk tolerance and long investment horizons.

2.10. Cryptocurrencies

Description: Digital or virtual currencies that use cryptography for security and operate independently of central banks.

Risks:

Volatility: Cryptocurrency prices can be extremely volatile.
Regulatory Risk: Regulatory frameworks are evolving and can impact the legality and use of cryptocurrencies.
Security Risk: Susceptibility to hacking and loss of digital wallets.
Market Risk: Lack of intrinsic value can lead to speculative bubbles.

Considerations: Cryptocurrencies are highly speculative and may not be suitable for all investors.

3. General Investment Risks

Beyond the specific risks associated with individual investment products, investors should be aware of general risks that can impact their investment portfolios:

Market Risk: The risk of losses due to overall market declines.
Inflation Risk: The risk that inflation will erode purchasing power and investment returns.
Currency Risk: For investments denominated in foreign currencies, exchange rate fluctuations can impact returns.
Interest Rate Risk: Changes in interest rates can affect the value of investments, particularly fixed-income securities.
Liquidity Risk: The risk of not being able to sell an investment quickly without significantly affecting its price.
Concentration Risk: Lack of diversification can lead to higher volatility and potential losses.
Reinvestment Risk: The risk that proceeds from investments may have to be reinvested at a lower rate of return.

4. Conclusion

Investing involves a range of risks that can affect the value and performance of investment portfolios. While diversification and careful planning can help manage some risks, it is impossible to eliminate all risks associated with investing.

At Finanz2go, we are committed to providing our clients with comprehensive information and guidance to help them make informed investment decisions. We encourage all clients to thoroughly assess their financial goals, risk tolerance, and investment knowledge before engaging in any investment activity.

For personalized advice and further information, please contact us directly.

This Risk Disclosure Statement is provided for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any financial products.