It is true that greater risk, greater potential rewards in investing, but taking on unnecessary risk is often avoidable. Investors can best protect themselves against risk by spreading their money among various investments, hoping that if one investment loses money, other investments will more than make up for those losses. This strategy, called “diversification,” can be neatly summed up as, “Don’t put all your eggs in one basket.”

Once you’ve saved money for investing, consider carefully all your options and think about what diversification strategy makes sense for you. There are quite a few investment products to choose from for example; stocks and shares, stock mutual funds, corporate bonds, bond mutual funds and money market funds.

Diversification can’t guarantee that your investments won’t suffer if market drops. But it can improve chances that you won’t lose money, or that if you do, it won’t be as much as if you weren’t diversified.

Risk Tolerance:

What are best saving and investing products for you? The answer depends on when you will need money, your goals, and if you will be able to sleep at night if you purchase a risky investment where you could lose your principal.

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Investors may typically pay a fee when they buy or sell their shares in fund, and those fees in part pay salaries and expenses of professionals who manage fund.

Even small fees can and do add up and eat into a significant chunk of returns a mutual fund is likely to produce, so you need to look carefully at how much a fund costs and think about how much it will cost you over amount of time you plan to own its shares. If two funds are similar in every way except that one charges a higher fee than other, you'll make more money by choosing fund with lower annual costs.

Past performance is not a reliable indicator of future performance. So don't be dazzled by last year's high returns. But past performance can help you assess a fund's volatility over time.

Making any sort of investment involved a certain amount of risk so it is always wise to seek advice of a professional before making any decisions.

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