The following steps can all help reduce investment risk: increase the percentage of portfolio cash, diversify asset classes, buy undervalued assets, own noncorrelated investments, monitor bond risk, increase investment knowledge, estimate investment risk, increase risk awareness, use defensive assets and use historical data to evaluate investments.
The first thing to do when looking to reduce risk is to diversify your portfolio. You can invest in a wide range of different ways from an index fund, to real estate, to a bond, to stocks and many others. The more places you are invested in, the less volatile your overall investment is.
The risk-reducing investing strategies laid out above are intentionally simple enough for anyone to do without expert help. But that doesn’t mean you should never seek out expert advice.
How you invest and manage your money is based on choices. This awareness allows for more proactive and unemotional actions. You’re more likely to build wealth from this place of knowledge and confidence than a place of avoidance and emotional investment decisions because you’re unprepared or indecisive.
The good news is, there’s plenty of ways to minimise the level of risk you take on when investing - here’s how. 1. Have a diversified portfolio of investments Diversification essentially translates to ‘don’t put all your eggs in one basket.’