How to manage Risk

While one cannot completely avoid market risks, one can take a number of steps to manage and minimize them.

• Diversify:

As in the case of business risks, market risks can be mitigated to a certain extent by diversification - not just at the product or sector level, but also in terms of region (domestic and foreign) and length of holdings (short- and long-term). One can spread his international risk by diversifying his investment over several different countries or regions.

• Research:

Learn about the forces that can impact your investment. Stay abreast of global economic trends and developments. If you are considering investing in a particular sector, for example, aerospace, read about the future of the aerospace industry. If you are thinking about investing in foreign securities, learn as much as you can about the market history and volatility, socio-political stability, trading practices, market and regulatory structure, arbitration and mediation forums, restrictions on international investing and repatriation of investment.

Learn more about the various types of investments options available to you and their risk levels. Inflation risk can be managed by holding products that provide purchasing power protection, such as inflation-linked bonds.