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Risk Warnings and Investment Disclaimers

Risk is fundamental to the investment process, but remains a concept that is not particularly well understood by most regular investors. For this reason, risk warnings – those vaguely worded, fine print disclaimers at the bottom of financial documents and websites – are extremely important for both buyers and sellers.

Unfortunately, although there are many warnings out there, they often remain unread or are not sufficiently explicit. An investor needs a substantial level of experience and sophistication to know what they really mean, or an advisor needs to take the time to explain it to the investor carefully. Yet, all too often, these conditions do not prevail. Sometimes, sellers obviously prefer to keep people in the dark in order to make a sale. In this article, we will look at the nature of risk warnings in order to figure out what gets the message across properly, and what still leaves investors not truly knowing what they could be getting into.