Home > Products & Services > Investment Center > Risk Reward Relationship
Credit Cards
Loans
Personal Accounts
CitiGold
Investment Center
Mutual Funds
Expert Advice
Products
Inflation
Long Term Investing
Diversification
Asset Allocation
Risk Reward Relationship
FAQ's
Glossary of Terms
Insurance
CitiPhone Banking
Citibank Online
Risk Reward Relationship

Investment risk and potential reward often go hand-in-hand. Generally speaking, the greater the risk, the greater the reward potential. The lower the risk, the lower your return is likely to be.

Risk-Reward Graph

Investment risk is often associated with high volatility. If the price of your investment fluctuates a lot, and you need to sell or redeem it when its price is down, you could lose some of your capital.

Different types of investments – such as stocks, bonds, and money market funds – carry different risk/potential return ratios. Different instruments within each category also vary in their riskiness and potential for return.

*Source: Micropal, AIM. The returns shown in the chart represent the performance of unmanaged indices and assume reinvestment of dividends and interest payments. The performance figures do not reflect the impact of any expenses, such as commissions or sales charges, that would have been associated with actual investments and would reduce returns. Indices used: S&P 500 (Stocks), Lehman Brothers Intermediate Government/Corporate Bonds Index (Bonds), Federal Reserve 91-Day Treasury Bill data (Cash).

Stocks generally have greater return potential than bonds, but the risk is higher. Short-term bonds generally have lower risk than long-term bonds, but they usually have lower yields as well.

Short-term investments whose safety is guaranteed by the government, like Treasury Bills, are considered to have little or no risk. Unfortunately, they usually have a lower rate of return than other investments. You also run the risk of locking yourself into lower-yielding investments just before interest rates rise.

In the Personal Investment Plan we design for you, we'll try to help you maximize your potential return consistent with your comfort level with risk. A very conservative investor, looking for safety, might have invested entirely in U.S. treasury bills, while a more aggressive investor, looking for high returns, might have invested entirely in stocks.

The low-risk strategy of the conservative investor would have produced a much lower return in the long term.

Over a 15-year period, the aggressive investor would have done much better, but would have faced large market swings, such as the market decline in 1987.

Despite the substantially greater risk, an aggressive investor who was able to hold on to this investment over the long term could have more than recouped the 1987 losses.

Of course, past performance is no guarantee for future results.

For more information call on our 24-Hour CitiPhone Service at 1758 2484 (CITI).

Disclaimer:

Investment Products :This website does not constitute any offer or solicitation to buy or sell. Investors should refer to the relevant offering document(s) for detailed information and applicable Terms and Conditions prior to subscription. Investment products are not bank deposits or obligations or guaranteed by Citibank N.A. Citigroup Inc. or any of its affiliates or subsidiaries unless specifically stated. Investment products are not insured by government or governmental agencies. Investment and treasury products are subject to investment risk, including possible loss of principal amount invested. Past performance is not indicative of future results: prices can go up or down. Investors investing in investments and/or treasury products denominated in foreign (non-local) currency should be aware of the risk of exchange rate fluctuations that may cause loss of principal when foreign currency is converted to the investors’ home currency. Investment and treasury products are not available to U.S. persons. All applications for investments and treasury products are subject to Terms and Conditions of the individual investment and treasury products. Customer understands that it is his/her responsibility to seek legal and/or tax advice regarding the legal and tax consequences of his/her investment transactions. If customer changes residence, citizenship, nationality, or place of work, it is his/her responsibility to understand how his/her investment transactions are affected by such change and comply with all applicable laws and regulations as and when such becomes applicable. Customer understands that Citibank does not provide legal and/or tax advice and are not responsible for advising him/her on the laws pertaining to his/her transaction.

Deposit/Interest rates : Deposit/interest rates are subject to change from time to time and without prior notice. Citibank Terms and Conditions apply and are subject to change without prior notice. They are available upon request and on the website. Citibank holds the right to refuse a deposit booking order from anyone at its sole discretion. For all products, special Terms and Conditions apply and these are available on request and are subject to change. All obligations under the products offered are payable solely at and by Citibank N.A. Bahrain Branch, subject to the laws of Bahrain (including any governmental actions, orders, decrees and regulations).

For all products, services, benefits, special Terms and Conditions apply, are subject to change without prior notice and are available upon request.