All investment instruments involve a risk, not only the possibility of no profit, but also the possibility of losing some or all of the money invested. However, you can manage risk with some proven techniques.

Distribution of funds invested
The first step in managing risk is a distribution of funds. This means putting your money in a variety of asset classes, among which include cash, stocks and bonds. Doing so is a measure of protection, usually when stocks perform well, bonds do not, and vice versa. Having cash is a measure of protection as well, but the risk of inflation, you can not lose capital.

In general, cash is the least risky category of asset, then the bonds and ultimately actions. Where to put your money depends largely on the type of investor you are, so please distribute its funds according to their needs and comfort level:


1.Aggressive investor
75% stocks
15% in bonds
10% in cash equivalents (cash)

2.Balanced Investor
50% stocks
25% in bonds
25% in cash equivalents (cash)

3.Conservative Investor
25% stocks
25% in bonds
50% in cash equivalents (cash)

Diversification
After distributing risk by investing in different asset classes can be further reduced through diversification. There are many types and classes of shares and bonds, some are much more risky (but with the possibility of a greater reward) than others. Therefore it is good idea to divide your funds among different investment vehicles with different risks and potential rewards.

An easy way to diversify their holdings is with mutual funds because they are composed of different types and categories of investment.

Constant investment (Dollar Cost Averaging)
Constant investment is another way to manage investment risk. You can carry out an ongoing investment by purchasing securities at a fixed sum at regular intervals. This way you buy more shares when the price is low and fewer shares when the price is high, and thus reduces the overall cost of shares purchased.

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