How to deal with risk of investing
Identify Risk Profile
This is your willingness and ability to withstand risk. Higher risk usually means higher potential returns, but also a chance of higher losses.
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Do what is best for your financial goals.
Diversify
Diversification is the simplest way to mitigate risk. This means your portfolio has different types of investments from different industries with different chances of risk.
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Can't guarantee against loss but will help limit it.
How to Diversify
Use different investment vehicles such as stocks, bonds, funds, or ETFs. Include investments from different sized companies within different industries.
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Index funds are good options to provide wide (and cheap) market exposure.
Use Available Tools
Some brokerage sites have tools that will help you build a diversified portfolio. You choose risk tolerance and then they recommend investments for you to buy and how much of each.
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It is important to reevaluate your diversification as your portfolio grows.
Importance of Dealing with Risk
As mentioned on the home page, investing is speculative by nature and therefore risky. Diversification is so important because it protects your money from market downturns. For example, if you had all big tech companies in your portfolio and there was a crash in tech development, then your entire portfolio could go to nothing. Before you jump in and start investing, use resources, such as portfolio builders on brokerage sites, to plan out a safe portfolio.