Key Risks – what you need to know
Although Lombard facilities can allow you to gear (leverage) your investment, improve returns and diversify your portfolio, please note that this strategy is not suitable for everyone.
No investments are risk-free and where the collateral value of your investment falls, this can require action on your part to restore collateral value to an acceptable level if the collateral value is no longer sufficient to cover your drawn credit facility. Consequently, you must be financially capable of and prepared to accept fluctuations and potentially losses.
In providing Lombard facilities, Trusted Novus Bank will reserve the right - as a last resort - to realise sufficient investments to close the position and redeem the loan in full or in part. The worst-case scenario is that you will lose your entire investment and be obliged to cover any losses towards the bank, which can be greater than your original investment.
For this reason, it is important that you have the necessary insight to be able to judge the risk of the investment and the consequences of a fall in the value of your investments. In addition, your net income and net asset situation should be of such nature that considerable losses during the investment period does not have any severe impact on your private economy and should be relative to your net income and net assets.
What may affect the investment?
Several factors may affect your investment - positively as well as negatively. Some of these are listed below:
- fluctuations in the prices of individual assets
- the gearing factor – the higher the gearing, the wider the fluctuations and the magnification of any losses
- insufficient liquidity in the market
- sudden changes in credit risk
- changes in the interest rate on the funding currency
- the value of the funding currency compared to the base currency
- the value of the funding currency compared to the currency of the investment
- the value of the currency of the investment compared to the base currency
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