This statement describes the principal risks of investing in securities. It cannot describe every risk, and you should not treat it as a substitute for your own assessment or for independent advice.
You can lose money
The value of investments and the income from them can fall as well as rise. You may get back less than you invested, and in some circumstances you may lose the entire amount. Past performance is not a reliable indicator of future results.
Equity risk
Shares represent ownership in a company. Their price reflects expectations about that company's future, and those expectations change. If a company becomes insolvent, shareholders rank behind all creditors and commonly recover nothing. Dividends are paid at the discretion of the board and are not guaranteed.
Fixed income risk
Bonds expose you to credit risk, being the risk that the issuer fails to pay interest or repay principal, and to interest rate risk, being the risk that the market price falls when prevailing rates rise. Longer-dated bonds are more sensitive to rate movements. A bond held to maturity still carries the risk that the issuer defaults.
Liquidity risk
Ethiopia's capital market is at an early stage of development. Trading volumes in some securities may be low, and there may be periods when you cannot sell a holding promptly, or can only do so at a price materially below the last quoted price. Do not invest money you may need to access at short notice.
Market and price volatility
Prices can move sharply in response to economic conditions, policy changes, currency movements, company announcements or general sentiment. In a market with limited depth, individual transactions can have a greater effect on price than they would in a more developed market.
Execution risk
A market order executes at whatever price is available and, in a thin order book, may fill at a price significantly different from the last traded price. Consider using limit orders where price matters more to you than certainty of execution.
Concentration risk
Holding a large proportion of your wealth in a single security or sector increases the impact of any adverse development affecting it. Diversification reduces company-specific risk but does not protect against a general market decline.
Inflation risk
Returns that appear positive in nominal terms may still leave you worse off in real terms if inflation exceeds them.
Regulation is not a guarantee
The firm is licensed and supervised, and client securities are held in your own account at the depository. These arrangements protect you against certain operational and conduct failures. They do not protect you against investment loss. No regulator insures the value of your investments.
Before you invest
Consider whether you understand the investment, whether you can bear the loss of the amount committed, and whether the time horizon matches when you will need the money. If you are uncertain, seek independent advice.