Risks are part of every capital investment. It is important to develop a basic understanding of the risks of investment products and financial services. These explanations are intended to give you such an understanding.

In principle, all securities offer opportunities for market, industry and company-related price increases.

The value of your investments or the prices of the investment funds as well as the income from them are subject to fluctuations. As a result, you may not get back the full amount you invest. In extreme cases, there is also the possibility of a total loss of your invested assets.

For more detailed information on risks in fund investments, we refer to the statements in the sales prospectus, in the key investor information and in the most recent annual and semi-annual reports that you received upon conclusion of the contract, which are available at www.Julius-IPB.com or upon request from of the FIS, FFS and FFB.

Objective of the capital investment

The objective of investing is to maintain or increase assets. The main difference between investments in capital markets and classic forms of saving such as savings books, money market accounts or time deposit accounts is the targeted taking of risks in order to seize opportunities for returns. With classic forms of savings, on the other hand, the amount paid in is guaranteed, but the return is limited to the agreed interest rate. Interplay of returns, security and liquidity

When choosing an investment strategy and the corresponding investment instruments, it is important to be aware of the following goals: return, security and liquidity.

Yield is the measure of the economic success of an investment, which is measured in profits or losses. These include price gains and distributions such as dividends or interest payments. Security is aimed at preserving the invested assets. The safety of an investment depends on the risks to which it is exposed. Liquidity describes the availability of the invested assets, i. H. when and at what cost the invested assets can be sold.

The goals of return, security and liquidity are interrelated. An investment with high liquidity and high security usually does not offer a high return.

General Risks

In addition to the specific risks of individual asset classes, investment instruments and financial services, there are general risks associated with capital investments. Some are described below.

Business cycle risk: The development of an economy typically takes place in waves, the phases of which can be divided into upswing, high phase, downturn and low phase. This economic cycle and the government and central bank interventions that it often involves can last for several years or decades and have a significant impact on the performance of various asset classes. Economically unfavorable phases can therefore affect a capital investment in the long term.

Inflation risk: The inflation risk describes the risk of suffering financial damage as a result of currency depreciation. If inflation, i.e. the increase in the price of goods and services, is higher than the nominal interest rate on an investment, this results in a loss of purchasing power equal to the difference. In this case one speaks of negative real interest rates.

Country risk: A foreign country can influence the movement of capital and the transferability of its currency. If a debtor resident in such a country is unable to meet an obligation (on time) for this reason despite his own solvency, this is referred to as a country or transfer risk. An investor can suffer financial loss as a result.

Currency risk: When investing in a foreign currency, the return achieved does not depend solely on the nominal return. It is also influenced by the development of the exchange rate of the foreign currency to the domestic currency. A financial loss can arise if the foreign currency in which the investment was made depreciates against the home currency.

Liquidity Risk: Investments that can usually be bought and sold at short notice and have bid and ask prices that are close together are said to be liquid. There is usually a sufficient number of buyers and sellers for these investments to ensure continuous and smooth trading. However, in the case of illiquid investments or in market phases in which there is insufficient liquidity, there is no guarantee that an investment can be sold at short notice and at low price discounts. This can lead to asset losses if, for example, an investment can only be sold at a price loss.

Cost risk: Costs are often neglected as a risk factor in investing. However, open and hidden costs are of crucial importance for investment success. For long-term investment success, it is essential to pay great attention to the costs of an investment. Banks, other financial service providers and fund providers charge management fees, commissions and other costs.

Tax risks: Income from capital investments is generally subject to taxes and/or duties for the investor. Changes in the tax framework for investment income can lead to a change in the tax and duty burden. In the case of investments abroad, double taxation can also occur. Taxes and levies therefore reduce the return that can actually be achieved by the investor. In addition, tax policy decisions can have a positive or negative impact on the price development of the capital markets as a whole.

Risk of debt-financed capital investments: Investors can obtain additional funds for the investment by borrowing or lending on their securities with the aim of increasing the investment amount. This approach creates a leverage effect on the capital employed and can significantly increase the risk. If the value of the portfolio falls, it may no longer be possible to meet the additional payment obligations of the loan or the interest and repayment requirements of the loan and the investor is forced to (partially) sell the portfolio. Credit-financed investments are therefore generally not recommended.