Understanding 'risk on' and 'risk off"

Risk on

When risky assets rise in price it is called “risk on”. Investors invest into assets that are defined as more “risky” such as commodites, oil, stocks, commodity-driven currencies, alternative assets, etc.

Risk off

 When risky assets fall in price it is called “risk off ”. People flee from stocks and typically economically-sensitive commodities like oil and invest in “safe” assets such as US Treasury bonds, US-dollars, etc.

Ever since the global financial crisis came to a head in 2008, “Risk on and “Risk off” have become the most widely used phrases in describing investment behaviour. Investors use these phrases as indicators as to whether they believe it is a “buying” or “selling” market in terms of certain assets. This fact sheet explains these investment terms, the correlation of assets since the financial crisis and when this phenomenon will fade.

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Courtesy: Discovery Invest