# Risks and Mitigants

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A vault is high risk when its TVL is a large % of the pool TVL, or if the pool's TVL is low.

These vaults have an increased risk of [market manipulation](https://chain.link/education-hub/market-manipulation-vs-oracle-exploits) and [adverse selection](https://en.wikipedia.org/wiki/Adverse_selection), both of which can lower your returns. Please deposit in small amounts, and frequently monitor the [performance](https://learn.charm.fi/charm/provide-liquidity/user-guides/performance-page) of your positions in high risk vaults.\
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The [vault's TVL](https://learn.charm.fi/charm/user-guides/vault-information-page#vault-tvl) and the [pool's TVL](https://learn.charm.fi/charm/user-guides/vault-information-page#pool-tvl) will be shown on the web app for every vault.
{% endhint %}

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<summary>Trending markets</summary>

The vaults are likely to underperform if the price only moves in one direction (ie in a [trending market](https://www.investopedia.com/terms/t/trending-market.asp)).

LPs should therefore closely monitor a vault's strategy, and withdraw if they believe the market price will consistently move outside the Liquidity Position chosen by the vault.

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<summary>Short term under-performance</summary>

Alpha Vaults offers a type of [passively managed](https://learn.charm.fi/charm/products-overview/alpha-vaults/whitepaper) LP Strategy that focuses on transparency and long-term performance. They may underperform actively managed LP Strategies in the short term.

LPs should therefore monitor the performances of different vault providers to decide whether Alpha Vaults remains the best option.&#x20;

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<summary>Unexpected Volatility</summary>

LPs should regularly update [their view](https://learn.charm.fi/charm/user-guides/vault-information-page#vault-overview) of how the price will move, to decide whether it's consistent with the vault's strategy. If not, they should withdraw their funds, or [change](https://learn.charm.fi/charm/manage-liquidity/user-guides/walkthroughs/edit-vault) the vault's parameters.

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<summary>Security risks</summary>

Alpha Vaults did not have any security incidents since it was [launched](https://x.com/CharmFinance/status/1390671266160549888) in May 2021, but security incidences may still happen. This is why it also received four [audits](https://learn.charm.fi/charm/appendix/audit-reports), and a [bug bounty](https://immunefi.com/bounty/charm/) programme is in place to ensure the code is continuously monitored.

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<summary>Manager risks </summary>

Anyone can [create](https://alpha.charm.fi/create) a vault, and as such, please do your due diligence on the vault managers before depositing.&#x20;

Charm will make every effort to verify vaults to establish who has created the vault, but can **NOT** provide assurance the vaults (and therefore your deposits) will not be mismanaged.

If anyone suspects mis-management, or otherwise [griefing](https://en.wikipedia.org/wiki/Griefer) of a vault, please report it in [Charm discord](https://t.co/M5DS2tVNU4).

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