My personal belief is that while returns can never be accurately predicted, risk can - and should be - managed. All investments carry a certain amount of risk, so understanding the risk/reward trade-off can help protect your investment portfolio. First, find your comfort level with risk. Think of how you might react to large market swings. Secondly, consider your ability to take on risk. This depends largely on your investment horizon. Next, consider whether you need to take the risk. What is the investment return you will need in order to meet your financial goals? Another strategy I stand by is portfolio diversification. This helps reduce your investment risk so that you won’t lose everything if the market underperforms. That’s why I recommend investing in different types of assets such as stocks, bonds, commodities etc to diversify your portfolio. What’s more, aim to diversify your investments within these asset classes. For bonds, this could mean purchasing different types of bonds like government bonds and corporate bonds with different maturities and different issuers. For stocks, this could mean investing in a mix of large cap, mid cap, and small cap stocks across different sectors. This is also the reason I generally recommend investing in Exchange Traded Funds (ETFs). With ETFs, you get quick, easy diversification since they allow you to invest in a large number of securities through a single transaction. Ultimately, your ideal asset allocation i.e. what you should invest in, is best determined by your risk profile, investment goals, and time horizon. If you would like an idea of what a diversified portfolio should look like based on these three factors, why not try Syfe's risk assessment tool to find out.