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Home People Save and invest Individual investment opportunities Risks related to trading in financial instruments

The rate of return and possible gain on each investment depends on the risk attached to that investment. A potentially higher gain is related to greater risk and a lower probability of return on the investment.  Irrational behaviour by investors or analysts and unforeseeable chance events may affect prices and therefore the rate of return and profits on investments. 
  
The size of risk is related to the duration of the investment.  
  
The previous development of prices does not guarantee that their future development will be the same, nor do past gains provide a guarantee of future gains. 
  
By investing funds in different types of assets within an investment portfolio, the rate of return risk in respect of these funds can be reduced. 
  
The bank does not recommend investing funds borrowed under a loan, since gains can usually be made only with greater risk and any such gains will be reduced considerably by the loan interest. 
  
Clients are fully liable for the due payment of taxes related to their investments. The bank does not offer advisory services on the taxation of yields. 
  
When investing in assets (especially securities) which are traded infrequently or in large amounts or which are not traded on a regulated market, it may not be possible to perform a transaction at the time stipulated by the client, or it may be possible at that time, but at a price unfavourable for the client. 
  
The execution risk on buy orders, sell orders or instructions depends on the conditions stipulated in the order or instruction, which from one case to another may, but need not, comply with the conditions of a regulated market. Regulated markets have differing conditions and these are liable to change.

Investments in assets denominated in a foreign currency are subject to the risk of movements in that currency's exchange rate.

The exchange-rate risk on investments in foreign-currency denominated assets applies not only to  investments returnable in these foreign currencies, but also to the assets denominated in the foreign currencies and traded in the domestic currency, since their price development usually tracks changes in the exchange rate of the currency in which they are denominated. 
Where a major international credit rating agency has assigned a rating to an issuer vis-à-vis its ability to discharge liabilities arising from the issuance of securities, any change in that rating could have a material effect on the income from such securities.

The lower the rating, the higher the interest payments on acquired funds. Yields higher than those on  money market funds are provided only by debt securities (i.e. securities giving rise to a right to a certain monetary payment at a stipulated time) that have a higher rate of return risk on the funds. 
  
The price of debt securities does not only depend on the amount of yields claimed on them or the financial results of their issuer, but also on developments in interest rates and the market in which they are traded. Where market interest rates rise, the market price of bonds declines.  
  
In the event of a borrower (issuer) becoming insolvent, any funds invested in debt securities that it has issued may be irrecoverable in part or in total and the investor may therefore make a loss.

Share investments do not include any guarantee that dividends will be paid or that the market price of the shares will rise. 

Share prices reflect not only the financial results of the respective company but also developments in the market on which the shares are traded. In the event of the company becoming insolvent, any funds invested in the shares that it has issued may be irrecoverable in part or in total and the investor may therefore make a loss. The market prices of shares may also be adversely affected by a rise in interest rates.
With investments in mutual fund shares, the risk lies in the repurchase option and in the investment strategy of the fund, i.e. the limits to what the fund may invest in (e.g. only debt assets repayable within 1 year, only bonds, only shares, only shares of other mutual funds, combinations thereof). As regards the fund shares of an open-end mutual fund managed by an asset management company in Slovakia, their owner may exercise a statutory right of repurchase against the asset management company which issued them and which has its registered office in Slovakia. 
  
Where it is agreed to make a payment at a particular future date and at a particular price or interest rate,  the risk is that the deal may be made on the agreed date at a better price or interest rate and that the obligation to meet the agreed price will therefore result in a loss-making transaction. The difference between the future price or interest rate and the pre-agreed price or interest rate may be unlimited, i.e. the potential loss on the payment made at the agreed future time and at the stipulated price or interest rate is unlimited.

Where a transaction is made in order to hedge the client's open position towards a rising or falling interest rate or exchange rate, the client may incur a loss upon a reversal in the movement of the interest rate or exchange rate.

 Where funds are invested in options exercisable at a particular date and at a particular price or interest rate, the risk is restricted to the loss of the invested funds. With an option, the risk of a potential loss is not unlimited. The risk attached to the due and timely exercise of an option is borne in full by the client. Since the bank is not obliged to remind or notify the client of when or how to exercise its option, it recommends that the client take due care in this matter, keep appropriate records for this purpose, and give the bank due and timely notification of its investment decision to exercise the option. 
  
The risk related to a financial instrument comprising two or more financial instruments or services may be greater than the risk related to either of these financial instruments. 

The client shall be aware that when acquiring funds in a foreign currency and making currency conversions, it must note potential exchange-rate movements. 
  
In regard to certain financial instruments, the execution of a client's buy order may be conditional on collateral being deposited and maintained in an amount not entirely dependent on the bank's decision.