There are two types of risk: market risk and company-specific risk. Learn more about these types of risks here.
Take our Risk Test to discover more about your personal risk tolerance.
Use our calculator to learn about Return on Investment, or ROI.
So you’ve started your investor journey. But before you start choosing investments, you need to consider the risks involved, as well as how much or how little risk you’re prepared to take with your money. Risk essentially means the...
Read moreSo you’ve started your investor journey. But before you start choosing investments, you need to consider the risks involved, as well as how much or how little risk you’re prepared to take with your money.
Risk essentially means the degree to which you’re willing to lose some or all of the money you have invested. Investors take risks to earn dividends, interest, or capital gains to increase the value of their investments over time.
Could be a short time or a long time.
It’s important to note that all investments come with risk. Generally, the higher the potential return an investment might offer, the higher the risk.
When you take on greater investment risk, there’s no guarantee that you will actually get a higher return.
So what is risk tolerance and how does it relate to you?
Your risk tolerance is the level of variability you are comfortable with in order to achieve your investment goals, and it’s different for each person.
Identifying the types of investments that fit your risk tolerance is an important piece of work that you and your registered investment advisor. if you choose to use one. do together when building a portfolio and determining your investment strategy.
There are three factors that affect risk tolerance:
Risk and investment return are connected. If you have a low risk tolerance, you will likely choose a more conservative growth portfolio with less volatility. If you have a higher risk tolerance, you will likely choose a riskier portfolio with a higher potential return and higher volatility.
Remember to pay attention to risk as well as return. If you focus only on achieving the highest possible return, you may not recognize the risk you’re taking.
Over time, your risk tolerance may shift as your financial circumstances change and you grow more knowledgeable about investing.
For example, life events like getting married, having a child, or preparing for retirement can make you rethink your risk tolerance and overall investment goals.
Have questions? Reach out to the BC Securities Commission.
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Cryptocurrencies and blockchain are the same thing.
Correct Answer: False
Blockchain is a type of digital ledger. A digital ledger records transaction information and then duplicates and distributes the information across the entire network of computer systems on that ledger. A cryptocurrency, on the other hand, is a digital asset that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.
Regulators and law enforcement can’t trace cryptocurrency transactions.
Correct Answer: False
Cryptocurrency transactions can be traced. Though cryptocurrencies can be created, moved, and stored outside the purview of governments, regulators, and financial institutions, each transaction is recorded in a permanent fixed digital ledger. The ledger allows anyone who is plugged in to view the transaction history.
Cryptocurrencies are low-risk investments if you buy and hold.
Correct Answer: False
Many factors may make cryptocurrencies and crypto assets risky investments (e.g., cyberattacks and hacking, their speculative nature, liquidity, security, and volatility). Additionally, many crypto assets and online crypto trading platforms aren’t regulated in Canada. Securities regulators are working with operators of platforms to ensure they comply with applicable securities laws.
I can trade crypto assets through a registered dealer in Canada.
Correct Answer: True
You can trade crypto assets in Canada using registered cryptocurrency platforms. Cryptocurrency trading is legal in Canada, and you should note that profits are taxable as capital gains, or as income if you are classified as a day trader. You can check a platform’s registration by visiting the Canadian Securities Administrators’ website or by contacting a Canadian securities regulator to inquire.
Non-fungible Tokens (NFTs) are a crypto asset that people can collect and trade.
Correct Answer: True
An NFT is a digital asset that often represents real-world objects like art, music, and videos. NFTs are bought and sold online, frequently with cryptocurrency, and they are generally encoded with the same underlying software as many cryptocurrencies. “Non-fungible” means that it’s unique and can’t be replaced with something else.
There is no difference between cryptocurrencies and crypto assets, these terms are interchangeable.
Correct Answer: False
The term “crypto assets” is generally used to reference a broad range of digital assets with a variety of properties and/or uses. The term “cryptocurrencies" refers to a specific type of crypto asset, which is generally designed to be used as a medium of exchange, similar to the way we use fiat currencies (a.k.a. government-issued money) to purchase goods and services.
Not all crypto assets are securities.
Correct Answer: True
Not all crypto assets are securities or are subject to securities laws. That said, the regulatory treatment of a particular crypto asset will depend on whether it is a security or derivative. Despite the fact that a crypto asset may not be classified as a security or derivative, the way they are bought, sold and/or traded can be subject to securities laws.
Bitcoin will retain its value and rise in price over time because there’s a limited supply.
Correct Answer: False
You could lose some or all of the money you used to purchase any crypto asset or cryptocurrency, including Bitcoin. Like many investments or financial assets, there is no guarantee that crypto assets or cryptocurrencies will retain their value or rise in price.
Cryptocurrencies can be used for payments.
Correct Answer: True
Some cryptocurrencies can be used for payments; however, it can be difficult, expensive, and/or slow. Their price volatility may also be a factor in an individual or business accepting cryptocurrency as a form of payment.
Crypto asset scams are among the most popular types of online investment scams.
Correct Answer: True
As the popularity and price of cryptocurrencies rise, so do the scams associated with these digital assets. The volatile, online, and often unregulated nature of crypto assets makes it easy for people to fall victim to fraud in a number of ways. For example, fraudsters use the anonymity of the internet to attempt to avoid detection by regulators or law enforcement.
Nice work. You have a good understanding of crypto assets! Crypto assets are a constantly evolving type of investment, so there is always more to know. Visit InvestRight.org to learn more about crypto assets, investment fraud, and other important investor education information with these resources:
Good job. You understand the basics of crypto assets! Because crypto assets are an ever-changing type of investment, there is always more to know. Check out InvestRight’s crypto asset resources to learn more about these digital investments:
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