Investments carry risks that depend on the type of investment. With Plum you can currently invest in Funds and Peer2Peer Loans through RateSetter.
Main risks when investing in funds:
Capital at risk. You earn a return because you are investing in tiny chunks of companies. This means you get a little bit of their profit, and the value of your share increases / falls with that of those companies. If the market has a poor year, your share can lose value, and you can get back less than you put in.
Volatility. Even if in the long run your capital might earn value, the nature of stock market returns mean that the value can fluctuate a lot. This means it only makes sense to invest in the longer run. Historical returns are not a good predictor of future returns
Main risks when investing in Peer2Peer Loans through RateSetter:
Capital at risk. You earn a return because you are lending your money out to someone else, through a P2P platform. These platform have a many safeguards in place, to limit the impact of individual loans defaulting, but your capital is still at risk. That means that if many more people would default than RateSetter expects, you could get reduced interest, or even lose part of the money you put in.
Waiting for your money. Because you are lending out money to someone, taking your money our means ‘selling’ your loan (and the opportunity for return) to the next investor. This other investor needs to be there for this to be possible, therefore you have the risk of having to wait for your money.