Managing risk involves several strategies:

• Diversification plays a crucial role in managing risk. By spreading investments across various assets, you reduce exposure to any single asset or risk. It’s like not putting all your eggs in one basket. If one investment doesn’t perform well, others might still do okay, reducing overall volatility and potential losses.
• There exist some advanced strategies that are deployed by more experienced investors. These include hedging, which involves making investments to reduce the risk of adverse price movements, using tools like options and futures contracts, and stop-loss orders, which represent a strategy of placing an order to buy or sell once a stock reaches a certain price, limiting potential losses.
• Adjusting for risk is also important. We made you familiar with two concepts thus far: standard deviation and beta. In real life, there are many more, but we suggest you start using them step-by-step.
• Compound interest is another powerful concept in investing. We already discussed this concept earlier as well.
  
  

To balance risk and return effectively, assess your risk tolerance using questionnaires or risk assessment tools. Align your risk levels with your short-term and long-term financial goals. Diversify your portfolio across different asset classes and geographical regions to spread regional risks. Regularly review and rebalance your portfolio to maintain the desired asset allocation and monitor performance against benchmarks.