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Yield / Risk

General risks can negatively impact the value of an investment. Moreover, several general risks in combination may magnify the negative effect.

Risk factor Impact
Business cycle risk

The general economy is usually cyclical and a business cycle lasts several years. In a cycle, the economy experiences high and low points in areas such as unemployment, order volumes, purchasing power, interest rate levels and other areas.

The values of investments are affected by business cycles. Badly timed buy and sell orders based on incorrect assessments can result in capital losses.

Inflation risk

Inflation is a process in which the demand of the economy as a whole for goods and services outpaces the supply. This results in rising prices and monetary depreciation.

The risk of this loss of purchasing power may reduce the real value of an investment as well as the real yield.

Country and transfer risk

Investing in foreign countries is subject to conditions specific to the countries in question. Country risk is the risk that, due to country-specific developments or restrictions, a company will pay dividends, interest and redemptions late or not at all. In addition, the economic or political instability of a country has an impact on risk. There are no hedging options against these risks except for not investing in such countries.


The volatility of a security measures its relative fluctuation range and is an indicator of the market risk of the security. The higher a security's volatility, the riskier it is. Volatility is usually measured over a specified period (e.g. 30 days, 60 days, 200 days). Volatility of 20%, for example, means that the price of a security ranges between 80% and 120% of the current price during the period in question.

Note that volatility refers to historical prices and cannot simply be extrapolated into the future. Therefore, the volatility of options (implicit volatility) is frequently used to assess the future fluctuation range.

Currency risk

If a shareholder has investments in a foreign currency, these investments are subject to currency risk. Unfavourable exchange rates will reduce the value of the investment. However, exchange rates may also have a positive impact on the value.

Liquidity risk

In certain situations, it may be necessary to sell shares immediately. At times this may require accepting a lower price to be able to sell the shares. In certain circumstances, even lowering the price does not help : the share is illiquid and cannot be converted into cash - it is termed liquidity risk.

In order to reduce this risk, stock exchanges have what are known as market makers whose task it is to quote bid and ask prices on an ongoing basis every day, i.e. to quote prices at which the share would be bought. But, depending on the kind of obligation, illiquidity may occur even then.

Tax risks Changes to tax legislation can have a negative impact on yields and price gains.
Risks associated with credit-financed securities purchases

As an investor, you have the option of borrowing cash against your securities safekeeping account. The loan amount depends on the type of securities and the applicable lending limit. The cash received can be reinvested. The shares held in safekeeping are used as collateral for the loan.

If the value of the collateralised shares declines, a margin call may result. This occurs when the value of the collateralised shares is less than that of the loan. With margin calls the lender (bank) demands additional collateral in the form of cash or more securities. If this collateral cannot be provided, the bank may, in a worst-case scenario, be forced to sell the positions.

Ancillary costs

Various fees apply in connection with securities transactions. These include commissions when buying and selling (brokerage fees), custody fees and other fees. Certain investments such as funds incur running costs (e.g. an annual management fee).

These costs reduce the yield. For more information on brokerage fees, the Swiss federal stamp tax and the turnover fee, see securities transactions.